Correlation Between BTM and Dai

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

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

Diversification Opportunities for BTM and Dai

0.0

Correlation Coefficient

BTM  Dai

Pay attention - limited upside

The 3 months correlation between BTM and Dai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BTM and Dai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dai and BTM 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 BTM are associated (or correlated) with Dai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dai has no effect on the direction of BTM i.e., BTM and Dai go up and down completely randomly.

Pair Corralation between BTM and Dai

If you would invest  0.53  in BTM on September 2, 2024 and sell it today you would earn a total of  0.05  from holding BTM or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BTM  vs.  Dai

BTM

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BTM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, BTM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dai

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BTM and Dai

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

The idea behind BTM and Dai 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.