Correlation Between BMTC and TWC Enterprises

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

By analyzing existing cross correlation between BMTC Group and TWC Enterprises, you can compare the effects of market volatilities on BMTC and TWC Enterprises 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 TWC Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMTC and TWC Enterprises.

Diversification Opportunities for BMTC and TWC Enterprises

-0.19

Correlation Coefficient

BMTC  TWC Enterprises

Good diversification

The 3 months correlation between BMTC and TWC is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BMTC Group and TWC Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWC Enterprises 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 TWC Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWC Enterprises has no effect on the direction of BMTC i.e., BMTC and TWC Enterprises go up and down completely randomly.

Pair Corralation between BMTC and TWC Enterprises

Assuming the 90 days trading horizon BMTC is expected to generate 1.08 times less return on investment than TWC Enterprises. In addition to that, BMTC is 1.25 times more volatile than TWC Enterprises. It trades about 0.03 of its total potential returns per unit of risk. TWC Enterprises is currently generating about 0.05 per unit of volatility. If you would invest  1,619  in TWC Enterprises on September 4, 2024 and sell it today you would earn a total of  213.00  from holding TWC Enterprises or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

BMTC Group  vs.  TWC Enterprises

BMTC Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMTC Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMTC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TWC Enterprises

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TWC Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, TWC Enterprises is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMTC and TWC Enterprises

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

The idea behind BMTC Group and TWC Enterprises 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.