Correlation Between POWER METALS and Britvic Plc

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

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

Diversification Opportunities for POWER METALS and Britvic Plc

0.69

Correlation Coefficient

POWER METALS  Britvic Plc

Poor diversification

The 3 months correlation between POWER and Britvic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding POWER METALS and Britvic plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Britvic plc and POWER METALS 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 POWER METALS are associated (or correlated) with Britvic Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Britvic plc has no effect on the direction of POWER METALS i.e., POWER METALS and Britvic Plc go up and down completely randomly.

Pair Corralation between POWER METALS and Britvic Plc

Assuming the 90 days trading horizon POWER METALS is expected to generate 11.43 times more return on investment than Britvic Plc. However, POWER METALS is 11.43 times more volatile than Britvic plc. It trades about 0.15 of its potential returns per unit of risk. Britvic plc is currently generating about 0.11 per unit of risk. If you would invest  16.00  in POWER METALS on September 3, 2024 and sell it today you would earn a total of  7.00  from holding POWER METALS or generate 43.75% return on investment over 90 days.

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

POWER METALS  vs.  Britvic plc

POWER METALS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in POWER METALS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, POWER METALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Britvic plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Britvic plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Britvic Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with POWER METALS and Britvic Plc

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

The idea behind POWER METALS and Britvic plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.