Correlation Between Now Corp and BC Bud

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

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

Diversification Opportunities for Now Corp and BC Bud

0.37

Correlation Coefficient

Now Corp  BC Bud

Weak diversification

The 3 months correlation between Now and BCBCF is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Now Corp and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud and Now Corp 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 Now Corp are associated (or correlated) with BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Now Corp i.e., Now Corp and BC Bud go up and down completely randomly.

Pair Corralation between Now Corp and BC Bud

Given the investment horizon of 90 days Now Corp is expected to generate 10.67 times more return on investment than BC Bud. However, Now Corp is 10.67 times more volatile than The BC Bud. It trades about 0.15 of its potential returns per unit of risk. The BC Bud is currently generating about -0.01 per unit of risk. If you would invest  0.01  in Now Corp on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Now Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Now Corp  vs.  The BC Bud

Now Corp

Risk-Adjusted Performance

Good

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

BC Bud

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Now Corp and BC Bud

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

The idea behind Now Corp and The BC Bud 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.