Correlation Between BTU Metals and BBB Foods

Can any of the company-specific risk be diversified away by investing in both BTU Metals and BBB Foods 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 BTU Metals and BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BTU Metals Corp and BBB Foods, you can compare the effects of market volatilities on BTU Metals and BBB Foods 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 BTU Metals with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTU Metals and BBB Foods.

Diversification Opportunities for BTU Metals and BBB Foods

-0.01

Correlation Coefficient

BTU Metals  BBB Foods

Good diversification

The 3 months correlation between BTU and BBB is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and BTU Metals 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 BTU Metals Corp are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of BTU Metals i.e., BTU Metals and BBB Foods go up and down completely randomly.

Pair Corralation between BTU Metals and BBB Foods

Assuming the 90 days horizon BTU Metals is expected to generate 1.04 times less return on investment than BBB Foods. In addition to that, BTU Metals is 2.74 times more volatile than BBB Foods. It trades about 0.03 of its total potential returns per unit of risk. BBB Foods is currently generating about 0.09 per unit of volatility. If you would invest  1,750  in BBB Foods on October 24, 2024 and sell it today you would earn a total of  1,276  from holding BBB Foods or generate 72.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.19%
Values	Daily Returns

BTU Metals Corp  vs.  BBB Foods

BTU Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, BTU Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BTU Metals and BBB Foods

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

The idea behind BTU Metals Corp and BBB Foods 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.