Correlation Between Social Life and Burnham Holdings

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

By analyzing existing cross correlation between Social Life Network and Burnham Holdings, you can compare the effects of market volatilities on Social Life and Burnham Holdings 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 Social Life with a short position of Burnham Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Social Life and Burnham Holdings.

Diversification Opportunities for Social Life and Burnham Holdings

-0.27

Correlation Coefficient

Social Life  Burnham Holdings

Very good diversification

The 3 months correlation between Social and Burnham is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Social Life Network and Burnham Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burnham Holdings and Social Life 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 Social Life Network are associated (or correlated) with Burnham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burnham Holdings has no effect on the direction of Social Life i.e., Social Life and Burnham Holdings go up and down completely randomly.

Pair Corralation between Social Life and Burnham Holdings

Given the investment horizon of 90 days Social Life Network is expected to generate 25.1 times more return on investment than Burnham Holdings. However, Social Life is 25.1 times more volatile than Burnham Holdings. It trades about 0.17 of its potential returns per unit of risk. Burnham Holdings is currently generating about -0.14 per unit of risk. If you would invest  0.03  in Social Life Network on October 14, 2024 and sell it today you would earn a total of  0.01  from holding Social Life Network or generate 33.33% return on investment over 90 days.

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

Social Life Network  vs.  Burnham Holdings

Social Life Network

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

Burnham Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Burnham Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Social Life and Burnham Holdings

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

The idea behind Social Life Network and Burnham Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.