Correlation Between Alchemy Pay and BCD

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

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

Diversification Opportunities for Alchemy Pay and BCD

0.91

Correlation Coefficient

Alchemy Pay  BCD

Almost no diversification

The 3 months correlation between Alchemy and BCD is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alchemy Pay and BCD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCD and Alchemy Pay 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 Alchemy Pay are associated (or correlated) with BCD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCD has no effect on the direction of Alchemy Pay i.e., Alchemy Pay and BCD go up and down completely randomly.

Pair Corralation between Alchemy Pay and BCD

Assuming the 90 days trading horizon Alchemy Pay is expected to under-perform the BCD. In addition to that, Alchemy Pay is 1.54 times more volatile than BCD. It trades about -0.07 of its total potential returns per unit of risk. BCD is currently generating about -0.09 per unit of volatility. If you would invest  13.00  in BCD on January 20, 2024 and sell it today you would lose (2.00) from holding BCD or give up 15.38% of portfolio value over 90 days.

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

Alchemy Pay  vs.  BCD

Alchemy Pay

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alchemy Pay are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Alchemy Pay exhibited solid returns over the last few months and may actually be approaching a breakup point.

BCD

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, BCD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alchemy Pay and BCD

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

The idea behind Alchemy Pay and BCD 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 Transaction History module to view history of all your transactions and understand their impact on performance.