Correlation Between Spin Master and BMTC

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

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

Diversification Opportunities for Spin Master and BMTC

0.67

Correlation Coefficient

Spin Master  BMTC

Poor diversification

The 3 months correlation between Spin and BMTC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Spin Master Corp and BMTC Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMTC Group and Spin Master 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 Spin Master Corp are associated (or correlated) with BMTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMTC Group has no effect on the direction of Spin Master i.e., Spin Master and BMTC go up and down completely randomly.

Pair Corralation between Spin Master and BMTC

Assuming the 90 days trading horizon Spin Master Corp is expected to under-perform the BMTC. But the stock apears to be less risky and, when comparing its historical volatility, Spin Master Corp is 1.16 times less risky than BMTC. The stock trades about -0.22 of its potential returns per unit of risk. The BMTC Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,280  in BMTC Group on December 19, 2024 and sell it today you would lose (111.00) from holding BMTC Group or give up 8.67% of portfolio value over 90 days.

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

Spin Master Corp  vs.  BMTC Group

Spin Master Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spin Master Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BMTC Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Spin Master and BMTC

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

The idea behind Spin Master Corp and BMTC Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.