Correlation Between Bip Investment and Westshore Terminals
Can any of the company-specific risk be diversified away by investing in both Bip Investment and Westshore Terminals 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 Westshore Terminals 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 Westshore Terminals Investment, you can compare the effects of market volatilities on Bip Investment and Westshore Terminals 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 Westshore Terminals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bip Investment and Westshore Terminals.
Diversification Opportunities for Bip Investment and Westshore Terminals
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bip and Westshore is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bip Investment Corp and Westshore Terminals Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westshore Terminals 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 Westshore Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westshore Terminals has no effect on the direction of Bip Investment i.e., Bip Investment and Westshore Terminals go up and down completely randomly.
Pair Corralation between Bip Investment and Westshore Terminals
Assuming the 90 days trading horizon Bip Investment is expected to generate 3.66 times less return on investment than Westshore Terminals. But when comparing it to its historical volatility, Bip Investment Corp is 2.16 times less risky than Westshore Terminals. It trades about 0.11 of its potential returns per unit of risk. Westshore Terminals Investment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,324 in Westshore Terminals Investment on August 31, 2024 and sell it today you would earn a total of 80.00 from holding Westshore Terminals Investment or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bip Investment Corp vs. Westshore Terminals Investment
Performance |
| Timeline |
| Bip Investment Corp |
| Westshore Terminals |
Bip Investment and Westshore Terminals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bip Investment and Westshore Terminals
The main advantage of trading using opposite Bip Investment and Westshore Terminals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bip Investment position performs unexpectedly, Westshore Terminals 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 Westshore Terminals will offset losses from the drop in Westshore Terminals' long position.The idea behind Bip Investment Corp and Westshore Terminals Investment 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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