Correlation Between Burford Capital and Altisource Asset

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Can any of the company-specific risk be diversified away by investing in both Burford Capital and Altisource Asset 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 Burford Capital and Altisource Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burford Capital and Altisource Asset Management, you can compare the effects of market volatilities on Burford Capital and Altisource Asset 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 Burford Capital with a short position of Altisource Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burford Capital and Altisource Asset.

Diversification Opportunities for Burford Capital and Altisource Asset

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Burford and Altisource is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Burford Capital and Altisource Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altisource Asset Man and Burford Capital 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 Burford Capital are associated (or correlated) with Altisource Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altisource Asset Man has no effect on the direction of Burford Capital i.e., Burford Capital and Altisource Asset go up and down completely randomly.

Pair Corralation between Burford Capital and Altisource Asset

Considering the 90-day investment horizon Burford Capital is expected to generate 9.79 times less return on investment than Altisource Asset. But when comparing it to its historical volatility, Burford Capital is 4.15 times less risky than Altisource Asset. It trades about 0.21 of its potential returns per unit of risk. Altisource Asset Management is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  1,055  in Altisource Asset Management on May 10, 2022 and sell it today you would earn a total of  1,485  from holding Altisource Asset Management or generate 140.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Burford Capital  vs.  Altisource Asset Management

 Performance (%) 
       Timeline  
Burford Capital 
Burford Performance
20 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Burford Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Burford Price Channel

Altisource Asset Man 
Altisource Performance
19 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Altisource Asset Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Altisource Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Altisource Price Channel

Burford Capital and Altisource Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Burford Capital and Altisource Asset

The main advantage of trading using opposite Burford Capital and Altisource Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burford Capital position performs unexpectedly, Altisource Asset 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 Altisource Asset will offset losses from the drop in Altisource Asset's long position.
The idea behind Burford Capital and Altisource Asset Management 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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