Correlation Between Bip Investment and Alliance Mining
Can any of the company-specific risk be diversified away by investing in both Bip Investment and Alliance Mining 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 Bip Investment and Alliance Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bip Investment Corp and Alliance Mining Corp, you can compare the effects of market volatilities on Bip Investment and Alliance Mining 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 Bip Investment with a short position of Alliance Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bip Investment and Alliance Mining.
Diversification Opportunities for Bip Investment and Alliance Mining
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bip and Alliance is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bip Investment Corp and Alliance Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Mining Corp and Bip Investment 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 Bip Investment Corp are associated (or correlated) with Alliance Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Mining Corp has no effect on the direction of Bip Investment i.e., Bip Investment and Alliance Mining go up and down completely randomly.
Pair Corralation between Bip Investment and Alliance Mining
Assuming the 90 days trading horizon Bip Investment is expected to generate 5.76 times less return on investment than Alliance Mining. But when comparing it to its historical volatility, Bip Investment Corp is 10.05 times less risky than Alliance Mining. It trades about 0.09 of its potential returns per unit of risk. Alliance Mining Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Alliance Mining Corp on October 22, 2024 and sell it today you would earn a total of 2.00 from holding Alliance Mining Corp or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.83% |
| Values | Daily Returns |
Bip Investment Corp vs. Alliance Mining Corp
Performance |
| Timeline |
| Bip Investment Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Alliance Mining Corp |
Bip Investment and Alliance Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bip Investment and Alliance Mining
The main advantage of trading using opposite Bip Investment and Alliance Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bip Investment position performs unexpectedly, Alliance Mining 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 Alliance Mining will offset losses from the drop in Alliance Mining's long position.The idea behind Bip Investment Corp and Alliance Mining Corp 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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