Correlation Between BMTC and Leons Furniture

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

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

Diversification Opportunities for BMTC and Leons Furniture

0.79

Correlation Coefficient

BMTC  Leons Furniture

Poor diversification

The 3 months correlation between BMTC and Leons is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BMTC Group and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and BMTC 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 BMTC Group are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of BMTC i.e., BMTC and Leons Furniture go up and down completely randomly.

Pair Corralation between BMTC and Leons Furniture

Assuming the 90 days trading horizon BMTC is expected to generate 1.0 times less return on investment than Leons Furniture. In addition to that, BMTC is 1.06 times more volatile than Leons Furniture Limited. It trades about 0.18 of its total potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.19 per unit of volatility. If you would invest  2,246  in Leons Furniture Limited on April 24, 2025 and sell it today you would earn a total of  479.00  from holding Leons Furniture Limited or generate 21.33% return on investment over 90 days.

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

BMTC Group  vs.  Leons Furniture Limited

BMTC Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMTC Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMTC displayed solid returns over the last few months and may actually be approaching a breakup point.

Leons Furniture

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leons Furniture Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Leons Furniture displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMTC and Leons Furniture

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

The idea behind BMTC Group and Leons Furniture Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.