Correlation Between BES Engineering and Kuo Toong
Can any of the company-specific risk be diversified away by investing in both BES Engineering and Kuo Toong 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 BES Engineering and Kuo Toong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BES Engineering Co and Kuo Toong International, you can compare the effects of market volatilities on BES Engineering and Kuo Toong 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 BES Engineering with a short position of Kuo Toong. Check out your portfolio center. Please also check ongoing floating volatility patterns of BES Engineering and Kuo Toong.
Diversification Opportunities for BES Engineering and Kuo Toong
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BES and Kuo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BES Engineering Co and Kuo Toong International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Toong International and BES Engineering 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 BES Engineering Co are associated (or correlated) with Kuo Toong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Toong International has no effect on the direction of BES Engineering i.e., BES Engineering and Kuo Toong go up and down completely randomly.
Pair Corralation between BES Engineering and Kuo Toong
Assuming the 90 days trading horizon BES Engineering Co is expected to generate 1.0 times more return on investment than Kuo Toong. However, BES Engineering Co is 1.0 times less risky than Kuo Toong. It trades about 0.08 of its potential returns per unit of risk. Kuo Toong International is currently generating about -0.07 per unit of risk. If you would invest 1,095 in BES Engineering Co on September 12, 2024 and sell it today you would earn a total of 30.00 from holding BES Engineering Co or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BES Engineering Co vs. Kuo Toong International
Performance |
| Timeline |
| BES Engineering |
| Kuo Toong International |
BES Engineering and Kuo Toong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BES Engineering and Kuo Toong
The main advantage of trading using opposite BES Engineering and Kuo Toong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BES Engineering position performs unexpectedly, Kuo Toong 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 Kuo Toong will offset losses from the drop in Kuo Toong's long position.| BES Engineering vs. Yang Ming Marine | BES Engineering vs. Wan Hai Lines | BES Engineering vs. U Ming Marine Transport | BES Engineering vs. Taiwan Navigation Co |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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