Correlation Between Terravest Capital and BMTC

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

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

Diversification Opportunities for Terravest Capital and BMTC

0.07

Correlation Coefficient

Terravest Capital  BMTC

Significant diversification

The 3 months correlation between Terravest and BMTC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Terravest Capital and BMTC Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMTC Group and Terravest Capital 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 Terravest Capital 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 Terravest Capital i.e., Terravest Capital and BMTC go up and down completely randomly.

Pair Corralation between Terravest Capital and BMTC

Assuming the 90 days trading horizon Terravest Capital is expected to generate 1.8 times more return on investment than BMTC. However, Terravest Capital is 1.8 times more volatile than BMTC Group. It trades about 0.11 of its potential returns per unit of risk. BMTC Group is currently generating about -0.08 per unit of risk. If you would invest  11,198  in Terravest Capital on December 30, 2024 and sell it today you would earn a total of  2,834  from holding Terravest Capital or generate 25.31% return on investment over 90 days.

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

Terravest Capital  vs.  BMTC Group

Terravest Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terravest Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward-looking signals, Terravest Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Terravest Capital and BMTC

The main advantage of trading using opposite Terravest Capital and BMTC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terravest Capital 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 Terravest Capital 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.