Correlation Between Bid and Truworths International

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

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

Diversification Opportunities for Bid and Truworths International

-0.5

Correlation Coefficient

Bid  Truworths International

Very good diversification

The 3 months correlation between Bid and Truworths is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bid Corp. and Truworths International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truworths International and Bid 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 Bid Corporation are associated (or correlated) with Truworths International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truworths International has no effect on the direction of Bid i.e., Bid and Truworths International go up and down completely randomly.

Pair Corralation between Bid and Truworths International

Assuming the 90 days trading horizon Bid is expected to generate 5.96 times less return on investment than Truworths International. But when comparing it to its historical volatility, Bid Corporation is 1.75 times less risky than Truworths International. It trades about 0.03 of its potential returns per unit of risk. Truworths International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  953,100  in Truworths International on September 14, 2024 and sell it today you would earn a total of  98,000  from holding Truworths International or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Bid Corp.  vs.  Truworths International

Bid Corporation

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bid Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Truworths International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truworths International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Truworths International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bid and Truworths International

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

The idea behind Bid Corporation and Truworths International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.