Correlation Between Stone Ridge and Bats Series

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

By analyzing existing cross correlation between Stone Ridge High and Bats Series M, you can compare the effects of market volatilities on Stone Ridge and Bats Series 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 Stone Ridge with a short position of Bats Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Bats Series.

Diversification Opportunities for Stone Ridge and Bats Series

-0.22

Correlation Coefficient

Stone Ridge  Bats Series

Very good diversification

The 3 months correlation between Stone and Bats is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Bats Series M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bats Series M and Stone Ridge 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 Stone Ridge High are associated (or correlated) with Bats Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bats Series M has no effect on the direction of Stone Ridge i.e., Stone Ridge and Bats Series go up and down completely randomly.

Pair Corralation between Stone Ridge and Bats Series

Assuming the 90 days horizon Stone Ridge High is expected to under-perform the Bats Series. But the mutual fund apears to be less risky and, when comparing its historical volatility, Stone Ridge High is 1.12 times less risky than Bats Series. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Bats Series M is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  815.00  in Bats Series M on December 29, 2024 and sell it today you would earn a total of  23.00  from holding Bats Series M or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Stone Ridge High  vs.  Bats Series M

Stone Ridge High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stone Ridge High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bats Series M

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bats Series M are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Bats Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stone Ridge and Bats Series

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

The idea behind Stone Ridge High and Bats Series M 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.