Correlation Between SafePal and BTS

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

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

Diversification Opportunities for SafePal and BTS

0.15

Correlation Coefficient

SafePal  BTS

Average diversification

The 3 months correlation between SafePal and BTS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SafePal and BTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTS and SafePal 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 SafePal are associated (or correlated) with BTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTS has no effect on the direction of SafePal i.e., SafePal and BTS go up and down completely randomly.

Pair Corralation between SafePal and BTS

Assuming the 90 days trading horizon SafePal is expected to generate 4.58 times less return on investment than BTS. But when comparing it to its historical volatility, SafePal is 2.55 times less risky than BTS. It trades about 0.03 of its potential returns per unit of risk. BTS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.17  in BTS on September 3, 2024 and sell it today you would earn a total of  0.02  from holding BTS or generate 10.93% return on investment over 90 days.

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

SafePal  vs.  BTS

SafePal

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SafePal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SafePal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BTS

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with SafePal and BTS

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

The idea behind SafePal and BTS 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.