Correlation Between BTM and Lisk
Can any of the company-specific risk be diversified away by investing in both BTM and Lisk 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 BTM and Lisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BTM and Lisk, you can compare the effects of market volatilities on BTM and Lisk 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 BTM with a short position of Lisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTM and Lisk.
Diversification Opportunities for BTM and Lisk
Very poor diversification
The 3 months correlation between BTM and Lisk is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BTM and Lisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisk and BTM 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 BTM are associated (or correlated) with Lisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisk has no effect on the direction of BTM i.e., BTM and Lisk go up and down completely randomly.
Pair Corralation between BTM and Lisk
Assuming the 90 days trading horizon BTM is expected to generate 0.57 times more return on investment than Lisk. However, BTM is 1.76 times less risky than Lisk. It trades about -0.07 of its potential returns per unit of risk. Lisk is currently generating about -0.07 per unit of risk. If you would invest 1.24 in BTM on January 26, 2024 and sell it today you would lose (0.11) from holding BTM or give up 8.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BTM vs. Lisk
Performance |
| Timeline |
| BTM |
| Lisk |
BTM and Lisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BTM and Lisk
The main advantage of trading using opposite BTM and Lisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTM position performs unexpectedly, Lisk 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 Lisk will offset losses from the drop in Lisk's long position.The idea behind BTM and Lisk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |