Correlation Between Bouvet and Black Sea

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

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

Diversification Opportunities for Bouvet and Black Sea

-0.59

Correlation Coefficient

Bouvet  Black Sea

Excellent diversification

The 3 months correlation between Bouvet and Black is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bouvet and Black Sea Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Sea Property and Bouvet 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 Bouvet are associated (or correlated) with Black Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Sea Property has no effect on the direction of Bouvet i.e., Bouvet and Black Sea go up and down completely randomly.

Pair Corralation between Bouvet and Black Sea

Assuming the 90 days trading horizon Bouvet is expected to generate 42.4 times less return on investment than Black Sea. But when comparing it to its historical volatility, Bouvet is 46.44 times less risky than Black Sea. It trades about 0.11 of its potential returns per unit of risk. Black Sea Property is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Black Sea Property on September 15, 2024 and sell it today you would lose (4.00) from holding Black Sea Property or give up 23.53% of portfolio value over 90 days.

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

Bouvet  vs.  Black Sea Property

Bouvet

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bouvet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bouvet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Black Sea Property

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Sea Property are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Black Sea disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bouvet and Black Sea

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

The idea behind Bouvet and Black Sea Property 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.