Correlation Between BAIYU Holdings and Terrace Ventures

Can any of the company-specific risk be diversified away by investing in both BAIYU Holdings and Terrace Ventures 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 BAIYU Holdings and Terrace Ventures into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BAIYU Holdings and Terrace Ventures, you can compare the effects of market volatilities on BAIYU Holdings and Terrace Ventures 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 BAIYU Holdings with a short position of Terrace Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAIYU Holdings and Terrace Ventures.

Diversification Opportunities for BAIYU Holdings and Terrace Ventures

0.61

Correlation Coefficient

BAIYU Holdings  Terrace Ventures

Poor diversification

The 3 months correlation between BAIYU and Terrace is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BAIYU Holdings and Terrace Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terrace Ventures and BAIYU Holdings 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 BAIYU Holdings are associated (or correlated) with Terrace Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terrace Ventures has no effect on the direction of BAIYU Holdings i.e., BAIYU Holdings and Terrace Ventures go up and down completely randomly.

Pair Corralation between BAIYU Holdings and Terrace Ventures

Considering the 90-day investment horizon BAIYU Holdings is expected to under-perform the Terrace Ventures. In addition to that, BAIYU Holdings is 1.36 times more volatile than Terrace Ventures. It trades about -0.31 of its total potential returns per unit of risk. Terrace Ventures is currently generating about -0.12 per unit of volatility. If you would invest  0.10  in Terrace Ventures on September 2, 2024 and sell it today you would lose (0.08) from holding Terrace Ventures or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.23%
Values	Daily Returns

BAIYU Holdings  vs.  Terrace Ventures

BAIYU Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAIYU Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Terrace Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terrace Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BAIYU Holdings and Terrace Ventures

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

The idea behind BAIYU Holdings and Terrace Ventures 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.