Correlation Between By Health and Railway Signal

Can any of the company-specific risk be diversified away by investing in both By Health and Railway Signal 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 By Health and Railway Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between By health and Railway Signal Communication, you can compare the effects of market volatilities on By Health and Railway Signal 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 By Health with a short position of Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of By Health and Railway Signal.

Diversification Opportunities for By Health and Railway Signal

0.72

Correlation Coefficient

By Health  Railway Signal

Poor diversification

The 3 months correlation between 300146 and Railway is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding By health and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu and By Health 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 By health are associated (or correlated) with Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of By Health i.e., By Health and Railway Signal go up and down completely randomly.

Pair Corralation between By Health and Railway Signal

Assuming the 90 days trading horizon By health is expected to under-perform the Railway Signal. In addition to that, By Health is 1.0 times more volatile than Railway Signal Communication. It trades about -0.1 of its total potential returns per unit of risk. Railway Signal Communication is currently generating about 0.0 per unit of volatility. If you would invest  629.00  in Railway Signal Communication on September 30, 2024 and sell it today you would lose (8.00) from holding Railway Signal Communication or give up 1.27% of portfolio value over 90 days.

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

By health  vs.  Railway Signal Communication

By health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days By health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Railway Signal Commu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Railway Signal Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Railway Signal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with By Health and Railway Signal

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

The idea behind By health and Railway Signal Communication 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.

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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.