Correlation Between BII Railway and Big 5
Can any of the company-specific risk be diversified away by investing in both BII Railway and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on BII Railway and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Big 5.
Diversification Opportunities for BII Railway and Big 5
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BII and Big is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of BII Railway i.e., BII Railway and Big 5 go up and down completely randomly.
Pair Corralation between BII Railway and Big 5
Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.92 times more return on investment than Big 5. However, BII Railway Transportation is 1.09 times less risky than Big 5. It trades about 0.01 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.07 per unit of risk. If you would invest 3.15 in BII Railway Transportation on August 24, 2024 and sell it today you would lose (0.45) from holding BII Railway Transportation or give up 14.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Big 5 Sporting
Performance |
| Timeline |
| BII Railway Transpor |
| Big 5 Sporting |
BII Railway and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Big 5
The main advantage of trading using opposite BII Railway and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.| BII Railway vs. AEGEAN AIRLINES | BII Railway vs. JAPAN AIRLINES | BII Railway vs. Gladstone Investment | BII Railway vs. MGIC INVESTMENT |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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