Correlation Between Carbon Revolution and Bt Brands

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

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

Diversification Opportunities for Carbon Revolution and Bt Brands

-0.08

Correlation Coefficient

Carbon Revolution  Bt Brands

Good diversification

The 3 months correlation between Carbon and BTBD is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Carbon Revolution Public and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Carbon Revolution 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 Carbon Revolution Public 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 Carbon Revolution i.e., Carbon Revolution and Bt Brands go up and down completely randomly.

Pair Corralation between Carbon Revolution and Bt Brands

Assuming the 90 days horizon Carbon Revolution Public is expected to generate 4.63 times more return on investment than Bt Brands. However, Carbon Revolution is 4.63 times more volatile than Bt Brands. It trades about 0.1 of its potential returns per unit of risk. Bt Brands is currently generating about 0.03 per unit of risk. If you would invest  4.89  in Carbon Revolution Public on October 11, 2024 and sell it today you would earn a total of  1.48  from holding Carbon Revolution Public or generate 30.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.69%
Values	Daily Returns

Carbon Revolution Public  vs.  Bt Brands

Carbon Revolution Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Bt Brands

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Bt Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carbon Revolution and Bt Brands

The main advantage of trading using opposite Carbon Revolution and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carbon Revolution 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 Carbon Revolution Public 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.