Correlation Between Altria and Bakkt Hldgs

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

Diversification Opportunities for Altria and Bakkt Hldgs

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Altria and Bakkt is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Bakkt Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakkt Hldgs and Altria 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 Altria Group are associated (or correlated) with Bakkt Hldgs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakkt Hldgs has no effect on the direction of Altria i.e., Altria and Bakkt Hldgs go up and down completely randomly.

Pair Corralation between Altria and Bakkt Hldgs

Allowing for the 90-day total investment horizon Altria is expected to generate 2.8 times less return on investment than Bakkt Hldgs. But when comparing it to its historical volatility, Altria Group is 8.89 times less risky than Bakkt Hldgs. It trades about 0.04 of its potential returns per unit of risk. Bakkt Hldgs is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  996.00  in Bakkt Hldgs on September 1, 2022 and sell it today you would lose (819.00)  from holding Bakkt Hldgs or give up 82.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Altria Group  vs.  Bakkt Hldgs

 Performance (%) 
       Timeline  
Altria Group 
Altria Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Altria is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Altria Price Channel

Bakkt Hldgs 
Bakkt Performance
0 of 100
Over the last 90 days Bakkt Hldgs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in December 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bakkt Price Channel

Altria and Bakkt Hldgs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altria and Bakkt Hldgs

The main advantage of trading using opposite Altria and Bakkt Hldgs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, Bakkt Hldgs 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 Bakkt Hldgs will offset losses from the drop in Bakkt Hldgs' long position.
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The idea behind Altria Group and Bakkt Hldgs 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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