Correlation Between Heilongjiang Transport and Bomesc Offshore

Can any of the company-specific risk be diversified away by investing in both Heilongjiang Transport and Bomesc Offshore 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 Heilongjiang Transport and Bomesc Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heilongjiang Transport Development and Bomesc Offshore Engineering, you can compare the effects of market volatilities on Heilongjiang Transport and Bomesc Offshore 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 Heilongjiang Transport with a short position of Bomesc Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Transport and Bomesc Offshore.

Diversification Opportunities for Heilongjiang Transport and Bomesc Offshore

0.91

Correlation Coefficient

Heilongjiang Transport  Bomesc Offshore

Almost no diversification

The 3 months correlation between Heilongjiang and Bomesc is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Transport Develop and Bomesc Offshore Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomesc Offshore Engi and Heilongjiang Transport 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 Heilongjiang Transport Development are associated (or correlated) with Bomesc Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bomesc Offshore Engi has no effect on the direction of Heilongjiang Transport i.e., Heilongjiang Transport and Bomesc Offshore go up and down completely randomly.

Pair Corralation between Heilongjiang Transport and Bomesc Offshore

Assuming the 90 days trading horizon Heilongjiang Transport Development is expected to generate 1.16 times more return on investment than Bomesc Offshore. However, Heilongjiang Transport is 1.16 times more volatile than Bomesc Offshore Engineering. It trades about 0.03 of its potential returns per unit of risk. Bomesc Offshore Engineering is currently generating about 0.01 per unit of risk. If you would invest  360.00  in Heilongjiang Transport Development on September 29, 2024 and sell it today you would earn a total of  8.00  from holding Heilongjiang Transport Development or generate 2.22% return on investment over 90 days.

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

Heilongjiang Transport Develop  vs.  Bomesc Offshore Engineering

Heilongjiang Transport

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Heilongjiang Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bomesc Offshore Engi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Heilongjiang Transport and Bomesc Offshore

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

The idea behind Heilongjiang Transport Development and Bomesc Offshore Engineering 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.