Correlation Between Bt Brands and Alsea SAB

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

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

Diversification Opportunities for Bt Brands and Alsea SAB

0.28

Correlation Coefficient

Bt Brands  Alsea SAB

Modest diversification

The 3 months correlation between BTBD and Alsea is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de and Bt Brands 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 Bt Brands are associated (or correlated) with Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Bt Brands i.e., Bt Brands and Alsea SAB go up and down completely randomly.

Pair Corralation between Bt Brands and Alsea SAB

Given the investment horizon of 90 days Bt Brands is expected to generate 1.47 times more return on investment than Alsea SAB. However, Bt Brands is 1.47 times more volatile than Alsea SAB de. It trades about 0.04 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.07 per unit of risk. If you would invest  160.00  in Bt Brands on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Bt Brands or generate 4.38% return on investment over 90 days.

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

Bt Brands  vs.  Alsea SAB de

Bt Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Bt Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bt Brands and Alsea SAB

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

The idea behind Bt Brands and Alsea SAB de 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.