Correlation Between BMTC and Spin Master

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

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

Diversification Opportunities for BMTC and Spin Master

-0.16

Correlation Coefficient

BMTC  Spin Master

Good diversification

The 3 months correlation between BMTC and Spin is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BMTC Group and Spin Master Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spin Master Corp and BMTC 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 BMTC Group are associated (or correlated) with Spin Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spin Master Corp has no effect on the direction of BMTC i.e., BMTC and Spin Master go up and down completely randomly.

Pair Corralation between BMTC and Spin Master

Assuming the 90 days trading horizon BMTC Group is expected to generate 0.82 times more return on investment than Spin Master. However, BMTC Group is 1.22 times less risky than Spin Master. It trades about 0.01 of its potential returns per unit of risk. Spin Master Corp is currently generating about 0.0 per unit of risk. If you would invest  1,398  in BMTC Group on October 11, 2024 and sell it today you would lose (3.00) from holding BMTC Group or give up 0.21% of portfolio value over 90 days.

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

BMTC Group  vs.  Spin Master Corp

BMTC Group

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BMTC Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMTC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spin Master Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spin Master Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Spin Master is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMTC and Spin Master

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

The idea behind BMTC Group and Spin Master Corp 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.