Correlation Between ULT and BRC
Can any of the company-specific risk be diversified away by investing in both ULT and BRC 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 ULT and BRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ULT and BRC, you can compare the effects of market volatilities on ULT and BRC 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 ULT with a short position of BRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ULT and BRC.
Diversification Opportunities for ULT and BRC
Almost no diversification
The 3 months correlation between ULT and BRC is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding ULT and BRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC and ULT 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 ULT are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC has no effect on the direction of ULT i.e., ULT and BRC go up and down completely randomly.
Pair Corralation between ULT and BRC
If you would invest 4,522 in BRC on January 24, 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ULT vs. BRC
Performance |
| Timeline |
| ULT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ULT and BRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ULT and BRC
The main advantage of trading using opposite ULT and BRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULT position performs unexpectedly, BRC 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 BRC will offset losses from the drop in BRC's long position.The idea behind ULT and BRC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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