Correlation Between Lion Chemtech and BHI
Can any of the company-specific risk be diversified away by investing in both Lion Chemtech and BHI 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 Lion Chemtech and BHI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Chemtech Co and BHI Co, you can compare the effects of market volatilities on Lion Chemtech and BHI 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 Lion Chemtech with a short position of BHI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Chemtech and BHI.
Diversification Opportunities for Lion Chemtech and BHI
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lion and BHI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and BHI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHI Co and Lion Chemtech 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 Lion Chemtech Co are associated (or correlated) with BHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHI Co has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and BHI go up and down completely randomly.
Pair Corralation between Lion Chemtech and BHI
Assuming the 90 days trading horizon Lion Chemtech Co is expected to under-perform the BHI. But the stock apears to be less risky and, when comparing its historical volatility, Lion Chemtech Co is 3.36 times less risky than BHI. The stock trades about -0.16 of its potential returns per unit of risk. The BHI Co is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,594,000 in BHI Co on November 7, 2024 and sell it today you would earn a total of 601,000 from holding BHI Co or generate 37.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Lion Chemtech Co vs. BHI Co
Performance |
| Timeline |
| Lion Chemtech |
| BHI Co |
Lion Chemtech and BHI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Chemtech and BHI
The main advantage of trading using opposite Lion Chemtech and BHI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Chemtech position performs unexpectedly, BHI 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 BHI will offset losses from the drop in BHI's long position.| Lion Chemtech vs. Kuk Young GM | Lion Chemtech vs. Nature and Environment | Lion Chemtech vs. Cheryong Industrial CoLtd |
| BHI vs. Youl Chon Chemical | BHI vs. Solus Advanced Materials | BHI vs. Sung Bo Chemicals | BHI vs. Polaris Office Corp |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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