Correlation Between Btsp II and FDO INV

Can any of the company-specific risk be diversified away by investing in both Btsp II and FDO INV 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 Btsp II and FDO INV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Btsp II Fundo and FDO INV CAD, you can compare the effects of market volatilities on Btsp II and FDO INV 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 Btsp II with a short position of FDO INV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Btsp II and FDO INV.

Diversification Opportunities for Btsp II and FDO INV

0.21

Correlation Coefficient

Btsp II  FDO INV

Modest diversification

The 3 months correlation between Btsp and FDO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Btsp II Fundo and FDO INV CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO INV CAD and Btsp II 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 Btsp II Fundo are associated (or correlated) with FDO INV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO INV CAD has no effect on the direction of Btsp II i.e., Btsp II and FDO INV go up and down completely randomly.

Pair Corralation between Btsp II and FDO INV

Assuming the 90 days trading horizon Btsp II is expected to generate 11.84 times less return on investment than FDO INV. But when comparing it to its historical volatility, Btsp II Fundo is 13.62 times less risky than FDO INV. It trades about 0.22 of its potential returns per unit of risk. FDO INV CAD is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  758.00  in FDO INV CAD on December 4, 2024 and sell it today you would earn a total of  50.00  from holding FDO INV CAD or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Btsp II Fundo  vs.  FDO INV CAD

Btsp II Fundo

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Btsp II Fundo are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Btsp II is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FDO INV CAD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV CAD are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, FDO INV sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Btsp II and FDO INV

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

The idea behind Btsp II Fundo and FDO INV CAD 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.