Correlation Between BII Railway and Dow
Can any of the company-specific risk be diversified away by investing in both BII Railway and Dow 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 BII Railway and Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Dow Inc, you can compare the effects of market volatilities on BII Railway and Dow 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 BII Railway with a short position of Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Dow.
Diversification Opportunities for BII Railway and Dow
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BII and Dow is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc and BII Railway 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 BII Railway Transportation are associated (or correlated) with Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of BII Railway i.e., BII Railway and Dow go up and down completely randomly.
Pair Corralation between BII Railway and Dow
Assuming the 90 days horizon BII Railway Transportation is expected to generate 1.76 times more return on investment than Dow. However, BII Railway is 1.76 times more volatile than Dow Inc. It trades about 0.03 of its potential returns per unit of risk. Dow Inc is currently generating about -0.08 per unit of risk. If you would invest 2.65 in BII Railway Transportation on November 3, 2024 and sell it today you would earn a total of 0.15 from holding BII Railway Transportation or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Dow Inc
Performance |
| Timeline |
| BII Railway Transpor |
| Dow Inc |
BII Railway and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Dow
The main advantage of trading using opposite BII Railway and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, Dow 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 Dow will offset losses from the drop in Dow's long position.| BII Railway vs. Accenture plc | BII Railway vs. International Business Machines | BII Railway vs. International Business Machines | BII Railway vs. Capgemini SE |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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