Correlation Between Data Communications and Birchtech Corp

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

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

Diversification Opportunities for Data Communications and Birchtech Corp

-0.02

Correlation Coefficient

Data Communications  Birchtech Corp

Good diversification

The 3 months correlation between Data and Birchtech is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Birchtech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchtech Corp and Data Communications 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 Data Communications Management are associated (or correlated) with Birchtech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchtech Corp has no effect on the direction of Data Communications i.e., Data Communications and Birchtech Corp go up and down completely randomly.

Pair Corralation between Data Communications and Birchtech Corp

Assuming the 90 days trading horizon Data Communications Management is expected to under-perform the Birchtech Corp. But the stock apears to be less risky and, when comparing its historical volatility, Data Communications Management is 1.11 times less risky than Birchtech Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Birchtech Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Birchtech Corp on April 30, 2025 and sell it today you would earn a total of  14.00  from holding Birchtech Corp or generate 19.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Data Communications Management  vs.  Birchtech Corp

Data Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Birchtech Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Birchtech Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Birchtech Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Communications and Birchtech Corp

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

The idea behind Data Communications Management and Birchtech Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.