Correlation Between Critic Clothing and BQE Water

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

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

Diversification Opportunities for Critic Clothing and BQE Water

-0.45

Correlation Coefficient

Critic Clothing  BQE Water

Very good diversification

The 3 months correlation between Critic and BQE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Critic Clothing and BQE Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BQE Water and Critic Clothing 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 Critic Clothing are associated (or correlated) with BQE Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BQE Water has no effect on the direction of Critic Clothing i.e., Critic Clothing and BQE Water go up and down completely randomly.

Pair Corralation between Critic Clothing and BQE Water

Given the investment horizon of 90 days Critic Clothing is expected to generate 16.44 times more return on investment than BQE Water. However, Critic Clothing is 16.44 times more volatile than BQE Water. It trades about 0.13 of its potential returns per unit of risk. BQE Water is currently generating about -0.07 per unit of risk. If you would invest  1.59  in Critic Clothing on December 21, 2024 and sell it today you would earn a total of  1.41  from holding Critic Clothing or generate 88.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Critic Clothing  vs.  BQE Water

Critic Clothing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Critic Clothing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Critic Clothing reported solid returns over the last few months and may actually be approaching a breakup point.

BQE Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days BQE Water has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BQE Water is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Critic Clothing and BQE Water

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

The idea behind Critic Clothing and BQE Water 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.