Correlation Between BRC and Space Communication

Can any of the company-specific risk be diversified away by investing in both BRC and Space Communication 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 BRC and Space Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRC Inc and Space Communication, you can compare the effects of market volatilities on BRC and Space Communication 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 BRC with a short position of Space Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and Space Communication.

Diversification Opportunities for BRC and Space Communication

0.0

Correlation Coefficient

BRC  Space Communication

Pay attention - limited upside

The 3 months correlation between BRC and Space is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BRC Inc and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication and BRC 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 BRC Inc are associated (or correlated) with Space Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of BRC i.e., BRC and Space Communication go up and down completely randomly.

Pair Corralation between BRC and Space Communication

Given the investment horizon of 90 days BRC Inc is expected to generate 1.11 times more return on investment than Space Communication. However, BRC is 1.11 times more volatile than Space Communication. It trades about -0.02 of its potential returns per unit of risk. Space Communication is currently generating about -0.05 per unit of risk. If you would invest  775.00  in BRC Inc on October 8, 2024 and sell it today you would lose (470.00) from holding BRC Inc or give up 60.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.58%
Values	Daily Returns

BRC Inc  vs.  Space Communication

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Space Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BRC and Space Communication

The main advantage of trading using opposite BRC and Space Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC position performs unexpectedly, Space Communication 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 Space Communication will offset losses from the drop in Space Communication's long position.

The idea behind BRC Inc and Space Communication 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.