Correlation Between BII Railway and InPlay Oil

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

By analyzing existing cross correlation between BII Railway Transportation and InPlay Oil Corp, you can compare the effects of market volatilities on BII Railway and InPlay Oil 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 BII Railway with a short position of InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and InPlay Oil.

Diversification Opportunities for BII Railway and InPlay Oil

0.52

Correlation Coefficient

BII Railway  InPlay Oil

Very weak diversification

The 3 months correlation between BII and InPlay is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and BII Railway 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 BII Railway Transportation are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of BII Railway i.e., BII Railway and InPlay Oil go up and down completely randomly.

Pair Corralation between BII Railway and InPlay Oil

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.94 times more return on investment than InPlay Oil. However, BII Railway Transportation is 1.06 times less risky than InPlay Oil. It trades about -0.04 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.05 per unit of risk. If you would invest  2.65  in BII Railway Transportation on September 13, 2024 and sell it today you would lose (0.05) from holding BII Railway Transportation or give up 1.89% of portfolio value over 90 days.

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

BII Railway Transportation  vs.  InPlay Oil Corp

BII Railway Transpor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway reported solid returns over the last few months and may actually be approaching a breakup point.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BII Railway and InPlay Oil

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

The idea behind BII Railway Transportation and InPlay Oil Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.