Correlation Between Big Tree and IT Tech
Can any of the company-specific risk be diversified away by investing in both Big Tree and IT Tech 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 Tree and IT Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and IT Tech Packaging, you can compare the effects of market volatilities on Big Tree and IT Tech 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 Tree with a short position of IT Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and IT Tech.
Diversification Opportunities for Big Tree and IT Tech
Very good diversification
The 3 months correlation between Big and ITP is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and IT Tech Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IT Tech Packaging and Big Tree 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 Tree Cloud are associated (or correlated) with IT Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IT Tech Packaging has no effect on the direction of Big Tree i.e., Big Tree and IT Tech go up and down completely randomly.
Pair Corralation between Big Tree and IT Tech
Assuming the 90 days horizon Big Tree Cloud is expected to generate 3.57 times more return on investment than IT Tech. However, Big Tree is 3.57 times more volatile than IT Tech Packaging. It trades about 0.08 of its potential returns per unit of risk. IT Tech Packaging is currently generating about -0.01 per unit of risk. If you would invest 5.22 in Big Tree Cloud on September 3, 2024 and sell it today you would lose (1.44) from holding Big Tree Cloud or give up 27.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 83.43% |
| Values | Daily Returns |
Big Tree Cloud vs. IT Tech Packaging
Performance |
| Timeline |
| Big Tree Cloud |
| IT Tech Packaging |
Big Tree and IT Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and IT Tech
The main advantage of trading using opposite Big Tree and IT Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree position performs unexpectedly, IT Tech 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 IT Tech will offset losses from the drop in IT Tech's long position.| Big Tree vs. Apogee Therapeutics, Common | Big Tree vs. Centessa Pharmaceuticals PLC | Big Tree vs. Chimerix | Big Tree vs. Ardelyx |
| IT Tech vs. Mondi PLC ADR | IT Tech vs. Holmen AB ADR | IT Tech vs. Canfor Pulp Products | IT Tech vs. Nine Dragons Paper |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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