Correlation Between Burford Capital and STX AP600

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Burford Capital and STX AP600 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 STX AP600 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burford Capital and STX AP600 CHEM PR EUR, you can compare the effects of market volatilities on Burford Capital and STX AP600 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 STX AP600. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burford Capital and STX AP600.

Diversification Opportunities for Burford Capital and STX AP600

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Burford and STX AP600 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Burford Capital and STX AP600 CHEM PR EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STX AP600 CHEM 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 STX AP600. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STX AP600 CHEM has no effect on the direction of Burford Capital i.e., Burford Capital and STX AP600 go up and down completely randomly.
    Optimize

Pair Corralation between Burford Capital and STX AP600

Considering the 90-day investment horizon Burford Capital is expected to generate 1.13 times more return on investment than STX AP600. However, Burford Capital is 1.13 times more volatile than STX AP600 CHEM PR EUR. It trades about -0.02 of its potential returns per unit of risk. STX AP600 CHEM PR EUR is currently generating about -0.06 per unit of risk. If you would invest  943.00  in Burford Capital on August 30, 2022 and sell it today you would lose (43.00)  from holding Burford Capital or give up 4.56% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy42.19%
ValuesDaily Returns

Burford Capital  vs.  STX AP600 CHEM PR EUR

 Performance (%) 
       Timeline  

Burford Capital and STX AP600 Volatility Contrast

   Predicted Return Density   
       Returns  

STX AP600 CHEM PR EUR

Pair trading matchups for STX AP600

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against STX AP600 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. STX AP600's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, STX AP600's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to STX AP600 CHEM PR EUR.

Pair Trading with Burford Capital and STX AP600

The main advantage of trading using opposite Burford Capital and STX AP600 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burford Capital position performs unexpectedly, STX AP600 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 STX AP600 will offset losses from the drop in STX AP600's long position.
Burford Capital vs. Alphabet Cl C
Burford Capital vs. Microsoft Corp
Burford Capital vs. Exxon Mobil Corp
Burford Capital vs. Unitedhealth Group
The idea behind Burford Capital and STX AP600 CHEM PR EUR 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against STX AP600 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. STX AP600's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, STX AP600's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to STX AP600 CHEM PR EUR.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

Other Complementary Tools

Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go