Correlation Between Promateris and Bittnet Systems

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

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

Diversification Opportunities for Promateris and Bittnet Systems

-0.15

Correlation Coefficient

Promateris  Bittnet Systems

Good diversification

The 3 months correlation between Promateris and Bittnet is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Promateris SA and Bittnet Systems SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bittnet Systems SA and Promateris 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 Promateris SA are associated (or correlated) with Bittnet Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bittnet Systems SA has no effect on the direction of Promateris i.e., Promateris and Bittnet Systems go up and down completely randomly.

Pair Corralation between Promateris and Bittnet Systems

Assuming the 90 days trading horizon Promateris SA is expected to under-perform the Bittnet Systems. In addition to that, Promateris is 2.62 times more volatile than Bittnet Systems SA. It trades about -0.06 of its total potential returns per unit of risk. Bittnet Systems SA is currently generating about 0.19 per unit of volatility. If you would invest  15.00  in Bittnet Systems SA on December 24, 2024 and sell it today you would earn a total of  2.00  from holding Bittnet Systems SA or generate 13.33% return on investment over 90 days.

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

Promateris SA  vs.  Bittnet Systems SA

Promateris SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Promateris SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bittnet Systems SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bittnet Systems SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bittnet Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Promateris and Bittnet Systems

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

The idea behind Promateris SA and Bittnet Systems SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.