Correlation Between Better World and BEC World
Can any of the company-specific risk be diversified away by investing in both Better World and BEC World 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 Better World and BEC World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Better World Green and BEC World Public, you can compare the effects of market volatilities on Better World and BEC World 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 Better World with a short position of BEC World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better World and BEC World.
Diversification Opportunities for Better World and BEC World
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Better and BEC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Better World Green and BEC World Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEC World Public and Better World 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 Better World Green are associated (or correlated) with BEC World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEC World Public has no effect on the direction of Better World i.e., Better World and BEC World go up and down completely randomly.
Pair Corralation between Better World and BEC World
Assuming the 90 days trading horizon Better World is expected to generate 82.08 times less return on investment than BEC World. But when comparing it to its historical volatility, Better World Green is 24.23 times less risky than BEC World. It trades about 0.02 of its potential returns per unit of risk. BEC World Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 440.00 in BEC World Public on September 3, 2024 and sell it today you would lose (30.00) from holding BEC World Public or give up 6.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Better World Green vs. BEC World Public
Performance |
| Timeline |
| Better World Green |
| BEC World Public |
Better World and BEC World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Better World and BEC World
The main advantage of trading using opposite Better World and BEC World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better World position performs unexpectedly, BEC World 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 BEC World will offset losses from the drop in BEC World's long position.| Better World vs. Beauty Community Public | Better World vs. Demco Public | Better World vs. Asia Aviation Public | Better World vs. CK Power Public |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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