Correlation Between Target and BC Bud

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

By analyzing existing cross correlation between Target Group and The BC Bud, you can compare the effects of market volatilities on Target and BC Bud 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 Target with a short position of BC Bud. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and BC Bud.

Diversification Opportunities for Target and BC Bud

-0.49

Correlation Coefficient

Target  BC Bud

Very good diversification

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

Pair Corralation between Target and BC Bud

Given the investment horizon of 90 days Target is expected to generate 3.23 times less return on investment than BC Bud. In addition to that, Target is 1.23 times more volatile than The BC Bud. It trades about 0.06 of its total potential returns per unit of risk. The BC Bud is currently generating about 0.25 per unit of volatility. If you would invest  5.09  in The BC Bud on September 16, 2024 and sell it today you would earn a total of  3.69  from holding The BC Bud or generate 72.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Target Group  vs.  The BC Bud

Target Group

Risk-Adjusted Performance

5 of 100

Modest

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

BC Bud

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and BC Bud

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

The idea behind Target Group and The BC Bud 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.