Correlation Between BRC and THR
Can any of the company-specific risk be diversified away by investing in both BRC and THR 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 THR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRC and THR, you can compare the effects of market volatilities on BRC and THR 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 THR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and THR.
Diversification Opportunities for BRC and THR
Good diversification
The 3 months correlation between BRC and THR is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BRC and THR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THR 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 THR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THR has no effect on the direction of BRC i.e., BRC and THR go up and down completely randomly.
Pair Corralation between BRC and THR
If you would invest 1,049,715 in THR on January 24, 2024 and sell it today you would earn a total of 0.00 from holding THR or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRC vs. THR
Performance |
| Timeline |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| THR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
BRC and THR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRC and THR
The main advantage of trading using opposite BRC and THR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC position performs unexpectedly, THR 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 THR will offset losses from the drop in THR's long position.The idea behind BRC and THR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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