Correlation Between BGrimm Power and Electricity Generating

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

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

Diversification Opportunities for BGrimm Power and Electricity Generating

0.61

Correlation Coefficient

BGrimm Power  Electricity Generating

Poor diversification

The 3 months correlation between BGrimm and Electricity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BGrimm Power Public and Electricity Generating Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electricity Generating and BGrimm Power 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 BGrimm Power Public are associated (or correlated) with Electricity Generating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electricity Generating has no effect on the direction of BGrimm Power i.e., BGrimm Power and Electricity Generating go up and down completely randomly.

Pair Corralation between BGrimm Power and Electricity Generating

Assuming the 90 days trading horizon BGrimm Power Public is expected to under-perform the Electricity Generating. In addition to that, BGrimm Power is 1.25 times more volatile than Electricity Generating Public. It trades about -0.21 of its total potential returns per unit of risk. Electricity Generating Public is currently generating about -0.01 per unit of volatility. If you would invest  12,000  in Electricity Generating Public on September 26, 2024 and sell it today you would lose (100.00) from holding Electricity Generating Public or give up 0.83% of portfolio value over 90 days.

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

BGrimm Power Public  vs.  Electricity Generating Public

BGrimm Power Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BGrimm Power Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers 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.

Electricity Generating

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electricity Generating Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Electricity Generating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BGrimm Power and Electricity Generating

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

The idea behind BGrimm Power Public and Electricity Generating Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.