Correlation Between Bellring Brands and EMC2

Can any of the company-specific risk be diversified away by investing in both Bellring Brands and EMC2 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 Bellring Brands and EMC2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bellring Brands LLC and EMC2, you can compare the effects of market volatilities on Bellring Brands and EMC2 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 Bellring Brands with a short position of EMC2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bellring Brands and EMC2.

Diversification Opportunities for Bellring Brands and EMC2

0.95

Correlation Coefficient

Bellring Brands  EMC2

Almost no diversification

The 3 months correlation between Bellring and EMC2 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bellring Brands LLC and EMC2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC2 and Bellring Brands 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 Bellring Brands LLC are associated (or correlated) with EMC2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC2 has no effect on the direction of Bellring Brands i.e., Bellring Brands and EMC2 go up and down completely randomly.

Pair Corralation between Bellring Brands and EMC2

Given the investment horizon of 90 days Bellring Brands is expected to generate 1.54 times less return on investment than EMC2. But when comparing it to its historical volatility, Bellring Brands LLC is 2.85 times less risky than EMC2. It trades about 0.47 of its potential returns per unit of risk. EMC2 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  0.03  in EMC2 on September 1, 2024 and sell it today you would earn a total of  0.02  from holding EMC2 or generate 67.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.92%
Values	Daily Returns

Bellring Brands LLC  vs.  EMC2

Bellring Brands LLC

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

EMC2

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EMC2 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EMC2 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bellring Brands and EMC2

The main advantage of trading using opposite Bellring Brands and EMC2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellring Brands position performs unexpectedly, EMC2 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 EMC2 will offset losses from the drop in EMC2's long position.

The idea behind Bellring Brands LLC and EMC2 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.