Correlation Between Bt Brands and NCR Corp

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

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

Diversification Opportunities for Bt Brands and NCR Corp

-0.04

Correlation Coefficient

Bt Brands  NCR Corp

Good diversification

The 3 months correlation between BTBD and NCR is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and NCR Corp Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR Corp Pref 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 NCR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR Corp Pref has no effect on the direction of Bt Brands i.e., Bt Brands and NCR Corp go up and down completely randomly.

Pair Corralation between Bt Brands and NCR Corp

Given the investment horizon of 90 days Bt Brands is expected to generate 11.63 times more return on investment than NCR Corp. However, Bt Brands is 11.63 times more volatile than NCR Corp Pref. It trades about 0.01 of its potential returns per unit of risk. NCR Corp Pref is currently generating about 0.02 per unit of risk. If you would invest  240.00  in Bt Brands on October 5, 2024 and sell it today you would lose (84.50) from holding Bt Brands or give up 35.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.58%
Values	Daily Returns

Bt Brands  vs.  NCR Corp Pref

Bt Brands

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

NCR Corp Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR Corp Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NCR Corp 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 Bt Brands and NCR Corp

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

The idea behind Bt Brands and NCR Corp Pref 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.