Correlation Between Ecofibre and BSP Financial

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

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

Diversification Opportunities for Ecofibre and BSP Financial

-0.43

Correlation Coefficient

Ecofibre  BSP Financial

Very good diversification

The 3 months correlation between Ecofibre and BSP is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group and Ecofibre 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 Ecofibre are associated (or correlated) with BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Ecofibre i.e., Ecofibre and BSP Financial go up and down completely randomly.

Pair Corralation between Ecofibre and BSP Financial

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the BSP Financial. In addition to that, Ecofibre is 3.91 times more volatile than BSP Financial Group. It trades about -0.02 of its total potential returns per unit of risk. BSP Financial Group is currently generating about 0.06 per unit of volatility. If you would invest  398.00  in BSP Financial Group on September 26, 2024 and sell it today you would earn a total of  258.00  from holding BSP Financial Group or generate 64.82% return on investment over 90 days.

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

Ecofibre  vs.  BSP Financial Group

Ecofibre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

BSP Financial Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, BSP Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ecofibre and BSP Financial

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

The idea behind Ecofibre and BSP Financial Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.