Correlation Between Leons Furniture and BMTC

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

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

Diversification Opportunities for Leons Furniture and BMTC

0.79

Correlation Coefficient

Leons Furniture  BMTC

Poor diversification

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

Pair Corralation between Leons Furniture and BMTC

Assuming the 90 days trading horizon Leons Furniture Limited is expected to generate 0.94 times more return on investment than BMTC. However, Leons Furniture Limited is 1.06 times less risky than BMTC. It trades about 0.19 of its potential returns per unit of risk. BMTC Group is currently generating about 0.18 per unit of risk. 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

Leons Furniture Limited  vs.  BMTC Group

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.

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.

Pair Trading with Leons Furniture and BMTC

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

The idea behind Leons Furniture Limited and BMTC Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.