Correlation Between BHI and IL Science
Can any of the company-specific risk be diversified away by investing in both BHI and IL Science 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 BHI and IL Science into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and IL Science Co, you can compare the effects of market volatilities on BHI and IL Science 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 BHI with a short position of IL Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and IL Science.
Diversification Opportunities for BHI and IL Science
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BHI and 307180 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and IL Science Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IL Science and BHI 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 BHI Co are associated (or correlated) with IL Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IL Science has no effect on the direction of BHI i.e., BHI and IL Science go up and down completely randomly.
Pair Corralation between BHI and IL Science
Assuming the 90 days trading horizon BHI Co is expected to generate 2.11 times more return on investment than IL Science. However, BHI is 2.11 times more volatile than IL Science Co. It trades about 0.23 of its potential returns per unit of risk. IL Science Co is currently generating about 0.27 per unit of risk. If you would invest 1,525,000 in BHI Co on October 20, 2024 and sell it today you would earn a total of 283,000 from holding BHI Co or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. IL Science Co
Performance |
| Timeline |
| BHI Co |
| IL Science |
BHI and IL Science Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and IL Science
The main advantage of trading using opposite BHI and IL Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI position performs unexpectedly, IL Science 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 IL Science will offset losses from the drop in IL Science's long position.The idea behind BHI Co and IL Science Co 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.| IL Science vs. Lion Chemtech Co | IL Science vs. Kuk Young GM | IL Science vs. Nature and Environment | IL Science vs. Cheryong Industrial CoLtd |
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 the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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