Correlation Between BOX and BRC

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

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

Diversification Opportunities for BOX and BRC

0.06

Correlation Coefficient

BOX  BRC

Significant diversification

The 3 months correlation between BOX and BRC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BOX and BRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC and BOX 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 BOX are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC has no effect on the direction of BOX i.e., BOX and BRC go up and down completely randomly.

Pair Corralation between BOX and BRC

If you would invest  0.02  in BOX on September 2, 2024 and sell it today you would earn a total of  0.00  from holding BOX or generate 12.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.52%
Values	Daily Returns

BOX  vs.  BRC

BOX

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BOX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BOX exhibited solid returns over the last few months and may actually be approaching a breakup point.

BRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BOX and BRC

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

The idea behind BOX and BRC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.