Correlation Between Better Collective and Terranet

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

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

Diversification Opportunities for Better Collective and Terranet

0.67

Correlation Coefficient

Better Collective  Terranet

Poor diversification

The 3 months correlation between Better and Terranet is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Better Collective and Terranet AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terranet AB and Better Collective 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 Better Collective are associated (or correlated) with Terranet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terranet AB has no effect on the direction of Better Collective i.e., Better Collective and Terranet go up and down completely randomly.

Pair Corralation between Better Collective and Terranet

Assuming the 90 days trading horizon Better Collective is expected to generate 0.73 times more return on investment than Terranet. However, Better Collective is 1.36 times less risky than Terranet. It trades about -0.13 of its potential returns per unit of risk. Terranet AB is currently generating about -0.12 per unit of risk. If you would invest  23,000  in Better Collective on September 2, 2024 and sell it today you would lose (10,460) from holding Better Collective or give up 45.48% of portfolio value over 90 days.

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

Better Collective  vs.  Terranet AB

Better Collective

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Collective has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Terranet AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terranet AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Better Collective and Terranet

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

The idea behind Better Collective and Terranet AB 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.