Correlation Between Bus Online and INKON Life

Can any of the company-specific risk be diversified away by investing in both Bus Online and INKON Life 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 Bus Online and INKON Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bus Online Co and INKON Life Technology, you can compare the effects of market volatilities on Bus Online and INKON Life 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 Bus Online with a short position of INKON Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bus Online and INKON Life.

Diversification Opportunities for Bus Online and INKON Life

0.77

Correlation Coefficient

Bus Online  INKON Life

Poor diversification

The 3 months correlation between Bus and INKON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bus Online Co and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and Bus Online 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 Bus Online Co are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of Bus Online i.e., Bus Online and INKON Life go up and down completely randomly.

Pair Corralation between Bus Online and INKON Life

Assuming the 90 days trading horizon Bus Online is expected to generate 3.36 times less return on investment than INKON Life. But when comparing it to its historical volatility, Bus Online Co is 1.25 times less risky than INKON Life. It trades about 0.03 of its potential returns per unit of risk. INKON Life Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  794.00  in INKON Life Technology on September 26, 2024 and sell it today you would earn a total of  131.00  from holding INKON Life Technology or generate 16.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bus Online Co  vs.  INKON Life Technology

Bus Online

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bus Online Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bus Online may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INKON Life Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INKON Life Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INKON Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bus Online and INKON Life

The main advantage of trading using opposite Bus Online and INKON Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bus Online position performs unexpectedly, INKON Life 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 INKON Life will offset losses from the drop in INKON Life's long position.

The idea behind Bus Online Co and INKON Life Technology 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.