Correlation Between Big Bird and Crescent Star
Can any of the company-specific risk be diversified away by investing in both Big Bird and Crescent Star 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 Big Bird and Crescent Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Bird Foods and Crescent Star Insurance, you can compare the effects of market volatilities on Big Bird and Crescent Star 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 Big Bird with a short position of Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Crescent Star.
Diversification Opportunities for Big Bird and Crescent Star
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Big and Crescent is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and Big Bird 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 Big Bird Foods are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Big Bird i.e., Big Bird and Crescent Star go up and down completely randomly.
Pair Corralation between Big Bird and Crescent Star
Assuming the 90 days trading horizon Big Bird is expected to generate 1.6 times less return on investment than Crescent Star. But when comparing it to its historical volatility, Big Bird Foods is 1.1 times less risky than Crescent Star. It trades about 0.05 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 140.00 in Crescent Star Insurance on August 31, 2024 and sell it today you would earn a total of 171.00 from holding Crescent Star Insurance or generate 122.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 22.87% |
| Values | Daily Returns |
Big Bird Foods vs. Crescent Star Insurance
Performance |
| Timeline |
| Big Bird Foods |
| Crescent Star Insurance |
Big Bird and Crescent Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Bird and Crescent Star
The main advantage of trading using opposite Big Bird and Crescent Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird position performs unexpectedly, Crescent Star 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 Crescent Star will offset losses from the drop in Crescent Star's long position.| Big Bird vs. Orient Rental Modaraba | Big Bird vs. Pakistan Hotel Developers | Big Bird vs. Pakistan Aluminium Beverage | Big Bird vs. Air Link Communication |
| Crescent Star vs. Air Link Communication | Crescent Star vs. Century Insurance | Crescent Star vs. Atlas Insurance | Crescent Star vs. Security Investment Bank |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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