Correlation Between TMT Investments and BH Macro
Can any of the company-specific risk be diversified away by investing in both TMT Investments and BH Macro 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 TMT Investments and BH Macro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMT Investments PLC and BH Macro Limited, you can compare the effects of market volatilities on TMT Investments and BH Macro 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 TMT Investments with a short position of BH Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Investments and BH Macro.
Diversification Opportunities for TMT Investments and BH Macro
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TMT and BHMU is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding TMT Investments PLC and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited and TMT Investments 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 TMT Investments PLC are associated (or correlated) with BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of TMT Investments i.e., TMT Investments and BH Macro go up and down completely randomly.
Pair Corralation between TMT Investments and BH Macro
Assuming the 90 days trading horizon TMT Investments is expected to generate 2.2 times less return on investment than BH Macro. In addition to that, TMT Investments is 1.66 times more volatile than BH Macro Limited. It trades about 0.01 of its total potential returns per unit of risk. BH Macro Limited is currently generating about 0.03 per unit of volatility. If you would invest 361.00 in BH Macro Limited on August 26, 2024 and sell it today you would earn a total of 36.00 from holding BH Macro Limited or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMT Investments PLC vs. BH Macro Limited
Performance |
| Timeline |
| TMT Investments PLC |
| BH Macro Limited |
TMT Investments and BH Macro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMT Investments and BH Macro
The main advantage of trading using opposite TMT Investments and BH Macro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Investments position performs unexpectedly, BH Macro 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 BH Macro will offset losses from the drop in BH Macro's long position.| TMT Investments vs. Retail Estates NV | TMT Investments vs. Ross Stores | TMT Investments vs. Tatton Asset Management | TMT Investments vs. Litigation Capital Management |
| BH Macro vs. Westlake Chemical Corp | BH Macro vs. Thor Mining PLC | BH Macro vs. McEwen Mining | BH Macro vs. Gaztransport et Technigaz |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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