Correlation Between Bt Brands and Renault SA

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

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

Diversification Opportunities for Bt Brands and Renault SA

-0.49

Correlation Coefficient

Bt Brands  Renault SA

Very good diversification

The 3 months correlation between BTBD and Renault is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Bt Brands i.e., Bt Brands and Renault SA go up and down completely randomly.

Pair Corralation between Bt Brands and Renault SA

Given the investment horizon of 90 days Bt Brands is expected to under-perform the Renault SA. In addition to that, Bt Brands is 5.49 times more volatile than Renault SA. It trades about 0.0 of its total potential returns per unit of risk. Renault SA is currently generating about 0.14 per unit of volatility. If you would invest  4,860  in Renault SA on December 20, 2024 and sell it today you would earn a total of  435.00  from holding Renault SA or generate 8.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Bt Brands  vs.  Renault SA

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.

Renault SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Renault SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bt Brands and Renault SA

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

The idea behind Bt Brands and Renault SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.