Correlation Between Bt Brands and Baldwin Insurance

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

By analyzing existing cross correlation between Bt Brands and The Baldwin Insurance, you can compare the effects of market volatilities on Bt Brands and Baldwin Insurance 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 Baldwin Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bt Brands and Baldwin Insurance.

Diversification Opportunities for Bt Brands and Baldwin Insurance

-0.16

Correlation Coefficient

Bt Brands  Baldwin Insurance

Good diversification

The 3 months correlation between BTBD and Baldwin is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of Bt Brands i.e., Bt Brands and Baldwin Insurance go up and down completely randomly.

Pair Corralation between Bt Brands and Baldwin Insurance

Given the investment horizon of 90 days Bt Brands is expected to generate 2.52 times less return on investment than Baldwin Insurance. In addition to that, Bt Brands is 2.29 times more volatile than The Baldwin Insurance. It trades about 0.01 of its total potential returns per unit of risk. The Baldwin Insurance is currently generating about 0.06 per unit of volatility. If you would invest  2,252  in The Baldwin Insurance on December 4, 2024 and sell it today you would earn a total of  1,796  from holding The Baldwin Insurance or generate 79.75% return on investment over 90 days.

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

Bt Brands  vs.  The Baldwin Insurance

Bt Brands

Risk-Adjusted Performance

Very Weak

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

Baldwin Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Baldwin Insurance 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 forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bt Brands and Baldwin Insurance

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

The idea behind Bt Brands and The Baldwin Insurance 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.