Correlation Between BAB and Butler National
Can any of the company-specific risk be diversified away by investing in both BAB and Butler National 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 BAB and Butler National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAB Inc and Butler National Corp, you can compare the effects of market volatilities on BAB and Butler National 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 BAB with a short position of Butler National. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAB and Butler National.
Diversification Opportunities for BAB and Butler National
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BAB and Butler is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BAB Inc and Butler National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butler National Corp and BAB 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 BAB Inc are associated (or correlated) with Butler National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butler National Corp has no effect on the direction of BAB i.e., BAB and Butler National go up and down completely randomly.
Pair Corralation between BAB and Butler National
Given the investment horizon of 90 days BAB is expected to generate 2.16 times less return on investment than Butler National. But when comparing it to its historical volatility, BAB Inc is 1.05 times less risky than Butler National. It trades about 0.09 of its potential returns per unit of risk. Butler National Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 146.00 in Butler National Corp on October 23, 2024 and sell it today you would earn a total of 37.00 from holding Butler National Corp or generate 25.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BAB Inc vs. Butler National Corp
Performance |
| Timeline |
| BAB Inc |
| Butler National Corp |
BAB and Butler National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAB and Butler National
The main advantage of trading using opposite BAB and Butler National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAB position performs unexpectedly, Butler National 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 Butler National will offset losses from the drop in Butler National's long position.The idea behind BAB Inc and Butler National 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.| Butler National vs. Ballistic Recovery Systems | Butler National vs. BAB Inc | Butler National vs. Optex Systems Holdings, | Butler National vs. Smith Midland Corp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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