Correlation Between BRC and HT
Can any of the company-specific risk be diversified away by investing in both BRC and HT 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 BRC and HT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRC and HT, you can compare the effects of market volatilities on BRC and HT 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 BRC with a short position of HT. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and HT.
Diversification Opportunities for BRC and HT
Poor diversification
The 3 months correlation between BRC and HT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BRC and HT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HT and BRC 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 BRC are associated (or correlated) with HT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HT has no effect on the direction of BRC i.e., BRC and HT go up and down completely randomly.
Pair Corralation between BRC and HT
If you would invest 4,522 in BRC on January 26, 2024 and sell it today you would earn a total of 0.00 from holding BRC or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.55% |
| Values | Daily Returns |
BRC vs. HT
Performance |
| Timeline |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| HT |
BRC and HT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRC and HT
The main advantage of trading using opposite BRC and HT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC position performs unexpectedly, HT 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 HT will offset losses from the drop in HT's long position.The idea behind BRC and HT 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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