Correlation Between Clime Investment and Butn

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

By analyzing existing cross correlation between Clime Investment Management and Butn, you can compare the effects of market volatilities on Clime Investment and Butn 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 Clime Investment with a short position of Butn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clime Investment and Butn.

Diversification Opportunities for Clime Investment and Butn

0.55

Correlation Coefficient

Clime Investment  Butn

Very weak diversification

The 3 months correlation between Clime and Butn is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and Butn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butn and Clime Investment 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 Clime Investment Management are associated (or correlated) with Butn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butn has no effect on the direction of Clime Investment i.e., Clime Investment and Butn go up and down completely randomly.

Pair Corralation between Clime Investment and Butn

Assuming the 90 days trading horizon Clime Investment Management is expected to under-perform the Butn. But the stock apears to be less risky and, when comparing its historical volatility, Clime Investment Management is 1.81 times less risky than Butn. The stock trades about -0.01 of its potential returns per unit of risk. The Butn is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7.40  in Butn on December 20, 2024 and sell it today you would earn a total of  2.60  from holding Butn or generate 35.14% return on investment over 90 days.

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

Clime Investment Management  vs.  Butn

Clime Investment Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clime Investment Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Clime Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Butn

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Butn are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Butn unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clime Investment and Butn

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

The idea behind Clime Investment Management and Butn 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.