Correlation Between BII Railway and CN DATANG
Can any of the company-specific risk be diversified away by investing in both BII Railway and CN DATANG 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 CN DATANG 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 CN DATANG C, you can compare the effects of market volatilities on BII Railway and CN DATANG 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 CN DATANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and CN DATANG.
Diversification Opportunities for BII Railway and CN DATANG
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BII and DT7 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C 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 CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of BII Railway i.e., BII Railway and CN DATANG go up and down completely randomly.
Pair Corralation between BII Railway and CN DATANG
Assuming the 90 days horizon BII Railway is expected to generate 12.99 times less return on investment than CN DATANG. But when comparing it to its historical volatility, BII Railway Transportation is 1.23 times less risky than CN DATANG. It trades about 0.0 of its potential returns per unit of risk. CN DATANG C is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14.00 in CN DATANG C on October 28, 2024 and sell it today you would earn a total of 10.00 from holding CN DATANG C or generate 71.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. CN DATANG C
Performance |
| Timeline |
| BII Railway Transpor |
| CN DATANG C |
BII Railway and CN DATANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and CN DATANG
The main advantage of trading using opposite BII Railway and CN DATANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, CN DATANG 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 CN DATANG will offset losses from the drop in CN DATANG's long position.| BII Railway vs. Accenture plc | BII Railway vs. International Business Machines | BII Railway vs. International Business Machines | BII Railway vs. Infosys Limited |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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