Correlation Between BT Group and Livermore Investments
Can any of the company-specific risk be diversified away by investing in both BT Group and Livermore Investments 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 BT Group and Livermore Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BT Group Plc and Livermore Investments Group, you can compare the effects of market volatilities on BT Group and Livermore Investments 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 BT Group with a short position of Livermore Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of BT Group and Livermore Investments.
Diversification Opportunities for BT Group and Livermore Investments
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BT-A and Livermore is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BT Group Plc and Livermore Investments Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livermore Investments and BT Group 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 BT Group Plc are associated (or correlated) with Livermore Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livermore Investments has no effect on the direction of BT Group i.e., BT Group and Livermore Investments go up and down completely randomly.
Pair Corralation between BT Group and Livermore Investments
Assuming the 90 days trading horizon BT Group Plc is expected to generate 2.84 times more return on investment than Livermore Investments. However, BT Group is 2.84 times more volatile than Livermore Investments Group. It trades about 0.29 of its potential returns per unit of risk. Livermore Investments Group is currently generating about 0.22 per unit of risk. If you would invest 14,215 in BT Group Plc on September 4, 2024 and sell it today you would earn a total of 1,875 from holding BT Group Plc or generate 13.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BT Group Plc vs. Livermore Investments Group
Performance |
| Timeline |
| BT Group Plc |
| Livermore Investments |
BT Group and Livermore Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BT Group and Livermore Investments
The main advantage of trading using opposite BT Group and Livermore Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BT Group position performs unexpectedly, Livermore Investments 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 Livermore Investments will offset losses from the drop in Livermore Investments' long position.| BT Group vs. JD Sports Fashion | BT Group vs. LPKF Laser Electronics | BT Group vs. Oakley Capital Investments | BT Group vs. Bankers Investment Trust |
| Livermore Investments vs. Evolution Gaming Group | Livermore Investments vs. BW Offshore | Livermore Investments vs. SBM Offshore NV | Livermore Investments vs. Vienna Insurance Group |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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