Correlation Between Octopus Aim and Bellway PLC

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

By analyzing existing cross correlation between Octopus Aim Vct and Bellway PLC, you can compare the effects of market volatilities on Octopus Aim and Bellway PLC 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 Octopus Aim with a short position of Bellway PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Octopus Aim and Bellway PLC.

Diversification Opportunities for Octopus Aim and Bellway PLC

-0.38

Correlation Coefficient

Octopus Aim  Bellway PLC

Very good diversification

The 3 months correlation between Octopus and Bellway is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Octopus Aim Vct and Bellway PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellway PLC and Octopus Aim 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 Octopus Aim Vct are associated (or correlated) with Bellway PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellway PLC has no effect on the direction of Octopus Aim i.e., Octopus Aim and Bellway PLC go up and down completely randomly.

Pair Corralation between Octopus Aim and Bellway PLC

Assuming the 90 days trading horizon Octopus Aim Vct is expected to under-perform the Bellway PLC. But the stock apears to be less risky and, when comparing its historical volatility, Octopus Aim Vct is 309.91 times less risky than Bellway PLC. The stock trades about -0.08 of its potential returns per unit of risk. The Bellway PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  249,400  in Bellway PLC on December 4, 2024 and sell it today you would lose (16,800) from holding Bellway PLC or give up 6.74% of portfolio value over 90 days.

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

Octopus Aim Vct  vs.  Bellway PLC

Octopus Aim Vct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Octopus Aim Vct has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Octopus Aim is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bellway PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bellway PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bellway PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Octopus Aim and Bellway PLC

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

The idea behind Octopus Aim Vct and Bellway PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.