Correlation Between Barrel and Cube Entertainment

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

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

Diversification Opportunities for Barrel and Cube Entertainment

0.7

Correlation Coefficient

Barrel  Cube Entertainment

Poor diversification

The 3 months correlation between Barrel and Cube is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Barrel Co and Cube Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cube Entertainment and Barrel 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 Barrel Co are associated (or correlated) with Cube Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cube Entertainment has no effect on the direction of Barrel i.e., Barrel and Cube Entertainment go up and down completely randomly.

Pair Corralation between Barrel and Cube Entertainment

Assuming the 90 days trading horizon Barrel Co is expected to generate 1.36 times more return on investment than Cube Entertainment. However, Barrel is 1.36 times more volatile than Cube Entertainment. It trades about 0.07 of its potential returns per unit of risk. Cube Entertainment is currently generating about -0.32 per unit of risk. If you would invest  611,000  in Barrel Co on February 6, 2024 and sell it today you would earn a total of  15,000  from holding Barrel Co or generate 2.45% return on investment over 90 days.

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

Barrel Co  vs.  Cube Entertainment

Barrel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Cube Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cube Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barrel and Cube Entertainment

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

The idea behind Barrel Co and Cube Entertainment 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.