Correlation Between BCN and STEEM

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

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

Diversification Opportunities for BCN and STEEM

-0.32

Correlation Coefficient

BCN  STEEM

Very good diversification

The 3 months correlation between BCN and STEEM is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BCN and STEEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEM and BCN 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 BCN are associated (or correlated) with STEEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEM has no effect on the direction of BCN i.e., BCN and STEEM go up and down completely randomly.

Pair Corralation between BCN and STEEM

Assuming the 90 days trading horizon BCN is expected to generate 71.61 times more return on investment than STEEM. However, BCN is 71.61 times more volatile than STEEM. It trades about 0.3 of its potential returns per unit of risk. STEEM is currently generating about 0.2 per unit of risk. If you would invest  0.02  in BCN on September 1, 2024 and sell it today you would lose (0.02) from holding BCN or give up 89.57% of portfolio value over 90 days.

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

BCN  vs.  STEEM

BCN

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

STEEM

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STEEM are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, STEEM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCN and STEEM

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

The idea behind BCN and STEEM 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.