Correlation Between Snap and BM Technologies
Can any of the company-specific risk be diversified away by investing in both Snap and BM Technologies 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 Snap and BM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and BM Technologies WT, you can compare the effects of market volatilities on Snap and BM Technologies 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 Snap with a short position of BM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and BM Technologies.
Diversification Opportunities for Snap and BM Technologies
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and BMTX-WT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and BM Technologies WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM Technologies WT and Snap 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 Snap Inc are associated (or correlated) with BM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM Technologies WT has no effect on the direction of Snap i.e., Snap and BM Technologies go up and down completely randomly.
Pair Corralation between Snap and BM Technologies
Given the investment horizon of 90 days Snap Inc is expected to generate 1.03 times more return on investment than BM Technologies. However, Snap is 1.03 times more volatile than BM Technologies WT. It trades about 0.08 of its potential returns per unit of risk. BM Technologies WT is currently generating about -0.1 per unit of risk. If you would invest 1,089 in Snap Inc on August 30, 2024 and sell it today you would earn a total of 72.00 from holding Snap Inc or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Snap Inc vs. BM Technologies WT
Performance |
| Timeline |
| Snap Inc |
| BM Technologies WT |
Snap and BM Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and BM Technologies
The main advantage of trading using opposite Snap and BM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, BM Technologies 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 BM Technologies will offset losses from the drop in BM Technologies' long position.The idea behind Snap Inc and BM Technologies WT 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.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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