Correlation Between Marstons PLC and Bt Brands

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

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

Diversification Opportunities for Marstons PLC and Bt Brands

0.07

Correlation Coefficient

Marstons PLC  Bt Brands

Significant diversification

The 3 months correlation between Marstons and BTBD is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Marstons PLC 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 Marstons PLC are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Marstons PLC i.e., Marstons PLC and Bt Brands go up and down completely randomly.

Pair Corralation between Marstons PLC and Bt Brands

Assuming the 90 days horizon Marstons PLC is expected to generate 3.75 times less return on investment than Bt Brands. But when comparing it to its historical volatility, Marstons PLC is 2.34 times less risky than Bt Brands. It trades about 0.01 of its potential returns per unit of risk. Bt Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Bt Brands on September 5, 2024 and sell it today you would lose (30.00) from holding Bt Brands or give up 16.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Marstons PLC  vs.  Bt Brands

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Marstons PLC and Bt Brands

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

The idea behind Marstons PLC and Bt Brands 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.