Correlation Between Capital Clean and Bt Brands

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

By analyzing existing cross correlation between Capital Clean Energy and Bt Brands, you can compare the effects of market volatilities on Capital Clean and Bt Brands 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 Capital Clean with a short position of Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Clean and Bt Brands.

Diversification Opportunities for Capital Clean and Bt Brands

0.19

Correlation Coefficient

Capital Clean  Bt Brands

Average diversification

The 3 months correlation between Capital and BTBD is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Capital Clean Energy and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Capital Clean 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 Capital Clean Energy are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Capital Clean i.e., Capital Clean and Bt Brands go up and down completely randomly.

Pair Corralation between Capital Clean and Bt Brands

Given the investment horizon of 90 days Capital Clean Energy is expected to generate 0.44 times more return on investment than Bt Brands. However, Capital Clean Energy is 2.26 times less risky than Bt Brands. It trades about -0.08 of its potential returns per unit of risk. Bt Brands is currently generating about -0.12 per unit of risk. If you would invest  1,880  in Capital Clean Energy on September 25, 2024 and sell it today you would lose (53.00) from holding Capital Clean Energy or give up 2.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capital Clean Energy  vs.  Bt Brands

Capital Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Bt Brands

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Capital Clean and Bt Brands

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

The idea behind Capital Clean Energy and Bt Brands 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.