Correlation Between Solana and BCPT

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

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

Diversification Opportunities for Solana and BCPT

0.99

Correlation Coefficient

Solana  BCPT

No risk reduction

The 3 months correlation between Solana and BCPT is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Solana and BCPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCPT and Solana 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 Solana are associated (or correlated) with BCPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCPT has no effect on the direction of Solana i.e., Solana and BCPT go up and down completely randomly.

Pair Corralation between Solana and BCPT

Assuming the 90 days trading horizon Solana is expected to generate 1.2 times more return on investment than BCPT. However, Solana is 1.2 times more volatile than BCPT. It trades about 0.27 of its potential returns per unit of risk. BCPT is currently generating about 0.26 per unit of risk. If you would invest  12,752  in Solana on September 1, 2024 and sell it today you would earn a total of  11,511  from holding Solana or generate 90.27% return on investment over 90 days.

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

Solana  vs.  BCPT

Solana

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana exhibited solid returns over the last few months and may actually be approaching a breakup point.

BCPT

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BCPT are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, BCPT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solana and BCPT

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

The idea behind Solana and BCPT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.