Correlation Between Roadside Real and BAE Systems

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

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

Diversification Opportunities for Roadside Real and BAE Systems

-0.3

Correlation Coefficient

Roadside Real  BAE Systems

Very good diversification

The 3 months correlation between Roadside and BAE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Roadside Real Estate and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc and Roadside Real 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 Roadside Real Estate are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of Roadside Real i.e., Roadside Real and BAE Systems go up and down completely randomly.

Pair Corralation between Roadside Real and BAE Systems

Assuming the 90 days trading horizon Roadside Real Estate is expected to generate 1.2 times more return on investment than BAE Systems. However, Roadside Real is 1.2 times more volatile than BAE Systems plc. It trades about 0.3 of its potential returns per unit of risk. BAE Systems plc is currently generating about -0.05 per unit of risk. If you would invest  2,100  in Roadside Real Estate on September 26, 2024 and sell it today you would earn a total of  950.00  from holding Roadside Real Estate or generate 45.24% return on investment over 90 days.

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

Roadside Real Estate  vs.  BAE Systems plc

Roadside Real Estate

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roadside Real Estate are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Roadside Real unveiled solid returns over the last few months and may actually be approaching a breakup point.

BAE Systems plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Roadside Real and BAE Systems

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

The idea behind Roadside Real Estate and BAE Systems 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.