Correlation Between KAUFMAN ET and BII Railway
Can any of the company-specific risk be diversified away by investing in both KAUFMAN ET and BII Railway 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 KAUFMAN ET and BII Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAUFMAN ET BROAD and BII Railway Transportation, you can compare the effects of market volatilities on KAUFMAN ET and BII Railway 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 KAUFMAN ET with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAUFMAN ET and BII Railway.
Diversification Opportunities for KAUFMAN ET and BII Railway
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KAUFMAN and BII is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KAUFMAN ET BROAD and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor and KAUFMAN ET 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 KAUFMAN ET BROAD are associated (or correlated) with BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of KAUFMAN ET i.e., KAUFMAN ET and BII Railway go up and down completely randomly.
Pair Corralation between KAUFMAN ET and BII Railway
Assuming the 90 days trading horizon KAUFMAN ET BROAD is expected to under-perform the BII Railway. In addition to that, KAUFMAN ET is 1.04 times more volatile than BII Railway Transportation. It trades about -0.06 of its total potential returns per unit of risk. BII Railway Transportation is currently generating about 0.23 per unit of volatility. If you would invest 2.60 in BII Railway Transportation on September 26, 2024 and sell it today you would earn a total of 0.20 from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAUFMAN ET BROAD vs. BII Railway Transportation
Performance |
| Timeline |
| KAUFMAN ET BROAD |
| BII Railway Transpor |
KAUFMAN ET and BII Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAUFMAN ET and BII Railway
The main advantage of trading using opposite KAUFMAN ET and BII Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAUFMAN ET position performs unexpectedly, BII Railway 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 BII Railway will offset losses from the drop in BII Railway's long position.The idea behind KAUFMAN ET BROAD and BII Railway Transportation 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.| BII Railway vs. Accenture plc | BII Railway vs. International Business Machines | BII Railway vs. Infosys Limited | BII Railway vs. Cognizant Technology Solutions |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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