Correlation Between BBB Foods and BTU Metals
Can any of the company-specific risk be diversified away by investing in both BBB Foods and BTU Metals 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 BBB Foods and BTU Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and BTU Metals Corp, you can compare the effects of market volatilities on BBB Foods and BTU Metals 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 BBB Foods with a short position of BTU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and BTU Metals.
Diversification Opportunities for BBB Foods and BTU Metals
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BBB and BTU is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp and BBB Foods 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 BBB Foods are associated (or correlated) with BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of BBB Foods i.e., BBB Foods and BTU Metals go up and down completely randomly.
Pair Corralation between BBB Foods and BTU Metals
Given the investment horizon of 90 days BBB Foods is expected to under-perform the BTU Metals. But the stock apears to be less risky and, when comparing its historical volatility, BBB Foods is 5.14 times less risky than BTU Metals. The stock trades about -0.09 of its potential returns per unit of risk. The BTU Metals Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.01 in BTU Metals Corp on December 17, 2024 and sell it today you would earn a total of 0.78 from holding BTU Metals Corp or generate 38.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 96.77% |
Values | Daily Returns |
BBB Foods vs. BTU Metals Corp
Performance |
Timeline |
BBB Foods |
BTU Metals Corp |
BBB Foods and BTU Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BBB Foods and BTU Metals
The main advantage of trading using opposite BBB Foods and BTU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, BTU Metals 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 BTU Metals will offset losses from the drop in BTU Metals' long position.BBB Foods vs. Braemar Hotels Resorts | BBB Foods vs. Treasury Wine Estates | BBB Foods vs. Pebblebrook Hotel Trust | BBB Foods vs. Brandywine Realty Trust |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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