Correlation Between Earth Tech and BCPG Public
Can any of the company-specific risk be diversified away by investing in both Earth Tech and BCPG Public 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 Earth Tech and BCPG Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Earth Tech Environment and BCPG Public, you can compare the effects of market volatilities on Earth Tech and BCPG Public 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 Earth Tech with a short position of BCPG Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earth Tech and BCPG Public.
Diversification Opportunities for Earth Tech and BCPG Public
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Earth and BCPG is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Earth Tech Environment and BCPG Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCPG Public and Earth Tech 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 Earth Tech Environment are associated (or correlated) with BCPG Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCPG Public has no effect on the direction of Earth Tech i.e., Earth Tech and BCPG Public go up and down completely randomly.
Pair Corralation between Earth Tech and BCPG Public
Assuming the 90 days trading horizon Earth Tech Environment is expected to generate 1.36 times more return on investment than BCPG Public. However, Earth Tech is 1.36 times more volatile than BCPG Public. It trades about -0.08 of its potential returns per unit of risk. BCPG Public is currently generating about -0.28 per unit of risk. If you would invest 216.00 in Earth Tech Environment on August 25, 2024 and sell it today you would lose (25.00) from holding Earth Tech Environment or give up 11.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Earth Tech Environment vs. BCPG Public
Performance |
| Timeline |
| Earth Tech Environment |
| BCPG Public |
Earth Tech and BCPG Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Earth Tech and BCPG Public
The main advantage of trading using opposite Earth Tech and BCPG Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earth Tech position performs unexpectedly, BCPG Public 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 BCPG Public will offset losses from the drop in BCPG Public's long position.The idea behind Earth Tech Environment and BCPG Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BCPG Public vs. Bangchak Public | BCPG Public vs. Gulf Energy Development | BCPG Public vs. Global Power Synergy | BCPG Public vs. Bangkok Expressway and |
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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