Correlation Between BRC and THX
Can any of the company-specific risk be diversified away by investing in both BRC and THX 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 THX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRC and THX, you can compare the effects of market volatilities on BRC and THX 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 THX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and THX.
Diversification Opportunities for BRC and THX
Pay attention - limited upside
The 3 months correlation between BRC and THX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BRC and THX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THX 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 THX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THX has no effect on the direction of BRC i.e., BRC and THX go up and down completely randomly.
Pair Corralation between BRC and THX
If you would invest 3.00 in THX on January 26, 2024 and sell it today you would earn a total of 0.00 from holding THX or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRC vs. THX
Performance |
| Timeline |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| THX |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
BRC and THX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRC and THX
The main advantage of trading using opposite BRC and THX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC position performs unexpectedly, THX 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 THX will offset losses from the drop in THX's long position.The idea behind BRC and THX 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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