Correlation Between New Generation and Bellatora

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

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

Diversification Opportunities for New Generation and Bellatora

0.04

Correlation Coefficient

New Generation  Bellatora

Significant diversification

The 3 months correlation between New and Bellatora is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Bellatora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellatora and New Generation 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 New Generation Consumer are associated (or correlated) with Bellatora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellatora has no effect on the direction of New Generation i.e., New Generation and Bellatora go up and down completely randomly.

Pair Corralation between New Generation and Bellatora

Given the investment horizon of 90 days New Generation is expected to generate 6.76 times less return on investment than Bellatora. But when comparing it to its historical volatility, New Generation Consumer is 1.97 times less risky than Bellatora. It trades about 0.04 of its potential returns per unit of risk. Bellatora is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Bellatora on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Bellatora or generate 0.0% return on investment over 90 days.

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

New Generation Consumer  vs.  Bellatora

New Generation Consumer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Bellatora

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bellatora are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Bellatora reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Generation and Bellatora

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

The idea behind New Generation Consumer and Bellatora 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 Commodity Directory module to find actively traded commodities issued by global exchanges.