Correlation Between Shandong Publishing and BCEG Environmental

Can any of the company-specific risk be diversified away by investing in both Shandong Publishing and BCEG Environmental 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 Shandong Publishing and BCEG Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Publishing Media and BCEG Environmental Remediation, you can compare the effects of market volatilities on Shandong Publishing and BCEG Environmental 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 Shandong Publishing with a short position of BCEG Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and BCEG Environmental.

Diversification Opportunities for Shandong Publishing and BCEG Environmental

-0.59

Correlation Coefficient

Shandong Publishing  BCEG Environmental

Excellent diversification

The 3 months correlation between Shandong and BCEG is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and BCEG Environmental Remediation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCEG Environmental and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with BCEG Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCEG Environmental has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and BCEG Environmental go up and down completely randomly.

Pair Corralation between Shandong Publishing and BCEG Environmental

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the BCEG Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.24 times less risky than BCEG Environmental. The stock trades about -0.03 of its potential returns per unit of risk. The BCEG Environmental Remediation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  959.00  in BCEG Environmental Remediation on September 15, 2024 and sell it today you would earn a total of  382.00  from holding BCEG Environmental Remediation or generate 39.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shandong Publishing Media  vs.  BCEG Environmental Remediation

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

BCEG Environmental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BCEG Environmental Remediation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BCEG Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and BCEG Environmental

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

The idea behind Shandong Publishing Media and BCEG Environmental Remediation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.