Correlation Between Baker Steel and BH Macro
Can any of the company-specific risk be diversified away by investing in both Baker Steel and BH Macro 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 Baker Steel and BH Macro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and BH Macro Limited, you can compare the effects of market volatilities on Baker Steel and BH Macro 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 Baker Steel with a short position of BH Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and BH Macro.
Diversification Opportunities for Baker Steel and BH Macro
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baker and BHMU is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited and Baker Steel 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 Baker Steel Resources are associated (or correlated) with BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of Baker Steel i.e., Baker Steel and BH Macro go up and down completely randomly.
Pair Corralation between Baker Steel and BH Macro
Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 1.62 times more return on investment than BH Macro. However, Baker Steel is 1.62 times more volatile than BH Macro Limited. It trades about 0.19 of its potential returns per unit of risk. BH Macro Limited is currently generating about 0.28 per unit of risk. If you would invest 5,350 in Baker Steel Resources on September 13, 2024 and sell it today you would earn a total of 450.00 from holding Baker Steel Resources or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. BH Macro Limited
Performance |
| Timeline |
| Baker Steel Resources |
| BH Macro Limited |
Baker Steel and BH Macro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and BH Macro
The main advantage of trading using opposite Baker Steel and BH Macro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel position performs unexpectedly, BH Macro 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 BH Macro will offset losses from the drop in BH Macro's long position.| Baker Steel vs. Samsung Electronics Co | Baker Steel vs. STMicroelectronics NV | Baker Steel vs. Fonix Mobile plc | Baker Steel vs. Arrow Electronics |
| BH Macro vs. Iron Mountain | BH Macro vs. Check Point Software | BH Macro vs. Baker Steel Resources | BH Macro vs. Spotify Technology SA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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