Correlation Between Dai and BTM

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

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

Diversification Opportunities for Dai and BTM

0.0

Correlation Coefficient

Dai  BTM

Pay attention - limited upside

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

Pair Corralation between Dai and BTM

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

Dai  vs.  BTM

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.

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.

Pair Trading with Dai and BTM

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

The idea behind Dai and BTM 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.