Correlation Between BOC Aviation and Solution Financial

Can any of the company-specific risk be diversified away by investing in both BOC Aviation and Solution Financial 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 BOC Aviation and Solution Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BOC Aviation Limited and Solution Financial, you can compare the effects of market volatilities on BOC Aviation and Solution Financial 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 BOC Aviation with a short position of Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOC Aviation and Solution Financial.

Diversification Opportunities for BOC Aviation and Solution Financial

0.75

Correlation Coefficient

BOC Aviation  Solution Financial

Poor diversification

The 3 months correlation between BOC and Solution is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BOC Aviation Limited and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial and BOC Aviation 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 BOC Aviation Limited are associated (or correlated) with Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of BOC Aviation i.e., BOC Aviation and Solution Financial go up and down completely randomly.

Pair Corralation between BOC Aviation and Solution Financial

Assuming the 90 days horizon BOC Aviation Limited is expected to generate 1.22 times more return on investment than Solution Financial. However, BOC Aviation is 1.22 times more volatile than Solution Financial. It trades about -0.06 of its potential returns per unit of risk. Solution Financial is currently generating about -0.09 per unit of risk. If you would invest  888.00  in BOC Aviation Limited on September 4, 2024 and sell it today you would lose (102.00) from holding BOC Aviation Limited or give up 11.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BOC Aviation Limited  vs.  Solution Financial

BOC Aviation Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BOC Aviation and Solution Financial

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

The idea behind BOC Aviation Limited and Solution Financial 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.