Correlation Between Weibo Corp and BHPA
Can any of the company-specific risk be diversified away by investing in both Weibo Corp and BHPA 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 Weibo Corp and BHPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weibo Corp and BHPA Inc, you can compare the effects of market volatilities on Weibo Corp and BHPA 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 Weibo Corp with a short position of BHPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and BHPA.
Diversification Opportunities for Weibo Corp and BHPA
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Weibo and BHPA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and BHPA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHPA Inc and Weibo Corp 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 Weibo Corp are associated (or correlated) with BHPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHPA Inc has no effect on the direction of Weibo Corp i.e., Weibo Corp and BHPA go up and down completely randomly.
Pair Corralation between Weibo Corp and BHPA
Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 8.57 times less return on investment than BHPA. But when comparing it to its historical volatility, Weibo Corp is 5.61 times less risky than BHPA. It trades about 0.14 of its potential returns per unit of risk. BHPA Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.30 in BHPA Inc on September 3, 2024 and sell it today you would earn a total of 0.20 from holding BHPA Inc or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weibo Corp vs. BHPA Inc
Performance |
| Timeline |
| Weibo Corp |
| BHPA Inc |
Weibo Corp and BHPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weibo Corp and BHPA
The main advantage of trading using opposite Weibo Corp and BHPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp position performs unexpectedly, BHPA 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 BHPA will offset losses from the drop in BHPA's long position.| Weibo Corp vs. YY Inc Class | Weibo Corp vs. DouYu International Holdings | Weibo Corp vs. Tencent Music Entertainment | Weibo Corp vs. Autohome |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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