Correlation Between BUA FOODS and DEAP CAPITAL

Can any of the company-specific risk be diversified away by investing in both BUA FOODS and DEAP CAPITAL 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 BUA FOODS and DEAP CAPITAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BUA FOODS PLC and DEAP CAPITAL MANAGEMENT, you can compare the effects of market volatilities on BUA FOODS and DEAP CAPITAL 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 BUA FOODS with a short position of DEAP CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BUA FOODS and DEAP CAPITAL.

Diversification Opportunities for BUA FOODS and DEAP CAPITAL

0.34

Correlation Coefficient

BUA FOODS  DEAP CAPITAL

Weak diversification

The 3 months correlation between BUA and DEAP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BUA FOODS PLC and DEAP CAPITAL MANAGEMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEAP CAPITAL MANAGEMENT and BUA FOODS 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 BUA FOODS PLC are associated (or correlated) with DEAP CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEAP CAPITAL MANAGEMENT has no effect on the direction of BUA FOODS i.e., BUA FOODS and DEAP CAPITAL go up and down completely randomly.

Pair Corralation between BUA FOODS and DEAP CAPITAL

Assuming the 90 days trading horizon BUA FOODS is expected to generate 1.55 times less return on investment than DEAP CAPITAL. But when comparing it to its historical volatility, BUA FOODS PLC is 3.45 times less risky than DEAP CAPITAL. It trades about 0.25 of its potential returns per unit of risk. DEAP CAPITAL MANAGEMENT is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in DEAP CAPITAL MANAGEMENT on October 10, 2024 and sell it today you would earn a total of  106.00  from holding DEAP CAPITAL MANAGEMENT or generate 530.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.04%
Values	Daily Returns

BUA FOODS PLC  vs.  DEAP CAPITAL MANAGEMENT

BUA FOODS PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BUA FOODS PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BUA FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

DEAP CAPITAL MANAGEMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DEAP CAPITAL MANAGEMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with BUA FOODS and DEAP CAPITAL

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

The idea behind BUA FOODS PLC and DEAP CAPITAL MANAGEMENT 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.