Correlation Between Yem Chio and BES Engineering
Can any of the company-specific risk be diversified away by investing in both Yem Chio and BES Engineering 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 Yem Chio and BES Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yem Chio Co and BES Engineering Co, you can compare the effects of market volatilities on Yem Chio and BES Engineering 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 Yem Chio with a short position of BES Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yem Chio and BES Engineering.
Diversification Opportunities for Yem Chio and BES Engineering
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Yem and BES is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Yem Chio Co and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering and Yem Chio 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 Yem Chio Co are associated (or correlated) with BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of Yem Chio i.e., Yem Chio and BES Engineering go up and down completely randomly.
Pair Corralation between Yem Chio and BES Engineering
Assuming the 90 days trading horizon Yem Chio Co is expected to under-perform the BES Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Yem Chio Co is 1.91 times less risky than BES Engineering. The stock trades about -0.08 of its potential returns per unit of risk. The BES Engineering Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,085 in BES Engineering Co on September 1, 2024 and sell it today you would earn a total of 40.00 from holding BES Engineering Co or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Yem Chio Co vs. BES Engineering Co
Performance |
| Timeline |
| Yem Chio |
| BES Engineering |
Yem Chio and BES Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yem Chio and BES Engineering
The main advantage of trading using opposite Yem Chio and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yem Chio position performs unexpectedly, BES Engineering 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 BES Engineering will offset losses from the drop in BES Engineering's long position.| Yem Chio vs. BES Engineering Co | Yem Chio vs. Continental Holdings Corp | Yem Chio vs. Kee Tai Properties | Yem Chio vs. Hung Sheng Construction |
| BES Engineering vs. Hung Sheng Construction | BES Engineering vs. Taiwan Glass Ind | BES Engineering vs. China Petrochemical Development | BES Engineering vs. Taiwan Tea 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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