Correlation Between Bt Brands and Syntec Optics

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

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

Diversification Opportunities for Bt Brands and Syntec Optics

-0.26

Correlation Coefficient

Bt Brands  Syntec Optics

Very good diversification

The 3 months correlation between BTBD and Syntec is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Syntec Optics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntec Optics Holdings 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 Syntec Optics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntec Optics Holdings has no effect on the direction of Bt Brands i.e., Bt Brands and Syntec Optics go up and down completely randomly.

Pair Corralation between Bt Brands and Syntec Optics

Given the investment horizon of 90 days Bt Brands is expected to generate 2.69 times less return on investment than Syntec Optics. But when comparing it to its historical volatility, Bt Brands is 3.04 times less risky than Syntec Optics. It trades about 0.06 of its potential returns per unit of risk. Syntec Optics Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Syntec Optics Holdings on October 9, 2024 and sell it today you would lose (19.00) from holding Syntec Optics Holdings or give up 6.33% of portfolio value over 90 days.

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

Bt Brands  vs.  Syntec Optics Holdings

Bt Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Bt Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Syntec Optics Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syntec Optics Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Syntec Optics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bt Brands and Syntec Optics

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

The idea behind Bt Brands and Syntec Optics Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.