Correlation Between Bt Brands and Adient PLC

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

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

Diversification Opportunities for Bt Brands and Adient PLC

0.46

Correlation Coefficient

Bt Brands  Adient PLC

Very weak diversification

The 3 months correlation between BTBD and Adient is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Bt Brands 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 Bt Brands are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Bt Brands i.e., Bt Brands and Adient PLC go up and down completely randomly.

Pair Corralation between Bt Brands and Adient PLC

Given the investment horizon of 90 days Bt Brands is expected to generate 2.07 times more return on investment than Adient PLC. However, Bt Brands is 2.07 times more volatile than Adient PLC. It trades about 0.0 of its potential returns per unit of risk. Adient PLC is currently generating about -0.1 per unit of risk. If you would invest  245.00  in Bt Brands on October 10, 2024 and sell it today you would lose (71.00) from holding Bt Brands or give up 28.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bt Brands  vs.  Adient PLC

Bt Brands

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Bt Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bt Brands and Adient PLC

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

The idea behind Bt Brands and Adient PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.