Correlation Between Popular and BFC Capital

Can any of the company-specific risk be diversified away by investing in both Popular and BFC Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Popular and BFC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Popular and BFC Capital Trust, you can compare the effects of market volatilities on Popular and BFC Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Popular with a short position of BFC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Popular and BFC Capital.

Diversification Opportunities for Popular and BFC Capital

0.26

Correlation Coefficient

Popular  BFC Capital

Modest diversification

The 3 months correlation between Popular and BFC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Popular and BFC Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFC Capital Trust and Popular is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Popular are associated (or correlated) with BFC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFC Capital Trust has no effect on the direction of Popular i.e., Popular and BFC Capital go up and down completely randomly.

Pair Corralation between Popular and BFC Capital

Assuming the 90 days horizon Popular is expected to generate 85.38 times less return on investment than BFC Capital. But when comparing it to its historical volatility, Popular is 1.1 times less risky than BFC Capital. It trades about 0.0 of its potential returns per unit of risk. BFC Capital Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,521  in BFC Capital Trust on December 28, 2024 and sell it today you would earn a total of  97.00  from holding BFC Capital Trust or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Popular  vs.  BFC Capital Trust

Popular

Risk-Adjusted Performance

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Popular is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

BFC Capital Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BFC Capital Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, BFC Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Popular and BFC Capital

The main advantage of trading using opposite Popular and BFC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Popular position performs unexpectedly, BFC Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BFC Capital will offset losses from the drop in BFC Capital's long position.

The idea behind Popular and BFC Capital Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.