Correlation Between BacTech Environmental and LanzaTech Global

Can any of the company-specific risk be diversified away by investing in both BacTech Environmental and LanzaTech Global 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 BacTech Environmental and LanzaTech Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BacTech Environmental and LanzaTech Global, you can compare the effects of market volatilities on BacTech Environmental and LanzaTech Global 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 BacTech Environmental with a short position of LanzaTech Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BacTech Environmental and LanzaTech Global.

Diversification Opportunities for BacTech Environmental and LanzaTech Global

0.48

Correlation Coefficient

BacTech Environmental  LanzaTech Global

Very weak diversification

The 3 months correlation between BacTech and LanzaTech is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BacTech Environmental and LanzaTech Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LanzaTech Global and BacTech Environmental 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 BacTech Environmental are associated (or correlated) with LanzaTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LanzaTech Global has no effect on the direction of BacTech Environmental i.e., BacTech Environmental and LanzaTech Global go up and down completely randomly.

Pair Corralation between BacTech Environmental and LanzaTech Global

Assuming the 90 days horizon BacTech Environmental is expected to generate 1.79 times more return on investment than LanzaTech Global. However, BacTech Environmental is 1.79 times more volatile than LanzaTech Global. It trades about 0.02 of its potential returns per unit of risk. LanzaTech Global is currently generating about -0.02 per unit of risk. If you would invest  2.69  in BacTech Environmental on September 4, 2024 and sell it today you would lose (0.55) from holding BacTech Environmental or give up 20.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BacTech Environmental  vs.  LanzaTech Global

BacTech Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BacTech Environmental are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, BacTech Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

LanzaTech Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LanzaTech Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BacTech Environmental and LanzaTech Global

The main advantage of trading using opposite BacTech Environmental and LanzaTech Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BacTech Environmental position performs unexpectedly, LanzaTech Global 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 LanzaTech Global will offset losses from the drop in LanzaTech Global's long position.

The idea behind BacTech Environmental and LanzaTech Global 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.