Correlation Between BP Plastics and Riverview Rubber
Can any of the company-specific risk be diversified away by investing in both BP Plastics and Riverview Rubber 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 BP Plastics and Riverview Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Plastics Holding and Riverview Rubber Estates, you can compare the effects of market volatilities on BP Plastics and Riverview Rubber 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 BP Plastics with a short position of Riverview Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plastics and Riverview Rubber.
Diversification Opportunities for BP Plastics and Riverview Rubber
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between 5100 and Riverview is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BP Plastics Holding and Riverview Rubber Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverview Rubber Estates and BP Plastics 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 BP Plastics Holding are associated (or correlated) with Riverview Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverview Rubber Estates has no effect on the direction of BP Plastics i.e., BP Plastics and Riverview Rubber go up and down completely randomly.
Pair Corralation between BP Plastics and Riverview Rubber
Assuming the 90 days trading horizon BP Plastics Holding is expected to generate 0.52 times more return on investment than Riverview Rubber. However, BP Plastics Holding is 1.91 times less risky than Riverview Rubber. It trades about -0.11 of its potential returns per unit of risk. Riverview Rubber Estates is currently generating about -0.08 per unit of risk. If you would invest 124.00 in BP Plastics Holding on November 2, 2024 and sell it today you would lose (2.00) from holding BP Plastics Holding or give up 1.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP Plastics Holding vs. Riverview Rubber Estates
Performance |
| Timeline |
| BP Plastics Holding |
| Riverview Rubber Estates |
BP Plastics and Riverview Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plastics and Riverview Rubber
The main advantage of trading using opposite BP Plastics and Riverview Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plastics position performs unexpectedly, Riverview Rubber 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 Riverview Rubber will offset losses from the drop in Riverview Rubber's long position.| BP Plastics vs. Choo Bee Metal | BP Plastics vs. Hong Leong Bank | BP Plastics vs. Senheng New Retail | BP Plastics vs. Malayan Banking Bhd |
| Riverview Rubber vs. Leader Steel Holdings | Riverview Rubber vs. CSC Steel Holdings | Riverview Rubber vs. Senheng New Retail | Riverview Rubber vs. Silver Ridge Holdings |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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