Correlation Between Advanced Braking and BSP Financial
Can any of the company-specific risk be diversified away by investing in both Advanced Braking and BSP Financial 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 Advanced Braking and BSP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Braking Technology and BSP Financial Group, you can compare the effects of market volatilities on Advanced Braking and BSP Financial 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 Advanced Braking with a short position of BSP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and BSP Financial.
Diversification Opportunities for Advanced Braking and BSP Financial
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Advanced and BSP is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Advanced Braking i.e., Advanced Braking and BSP Financial go up and down completely randomly.
Pair Corralation between Advanced Braking and BSP Financial
Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 1.56 times more return on investment than BSP Financial. However, Advanced Braking is 1.56 times more volatile than BSP Financial Group. It trades about 0.09 of its potential returns per unit of risk. BSP Financial Group is currently generating about 0.07 per unit of risk. If you would invest 3.90 in Advanced Braking Technology on August 26, 2024 and sell it today you would earn a total of 5.00 from holding Advanced Braking Technology or generate 128.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Braking Technology vs. BSP Financial Group
Performance |
| Timeline |
| Advanced Braking Tec |
| BSP Financial Group |
Advanced Braking and BSP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Braking and BSP Financial
The main advantage of trading using opposite Advanced Braking and BSP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Braking position performs unexpectedly, BSP Financial 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 BSP Financial will offset losses from the drop in BSP Financial's long position.| Advanced Braking vs. Insignia Financial | Advanced Braking vs. Commonwealth Bank of | Advanced Braking vs. Kingsrose Mining | Advanced Braking vs. National Australia Bank |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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