Correlation Between BII Railway and PATRICK INDUSTR

Can any of the company-specific risk be diversified away by investing in both BII Railway and PATRICK INDUSTR 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 PATRICK INDUSTR 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 PATRICK INDUSTR, you can compare the effects of market volatilities on BII Railway and PATRICK INDUSTR 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 PATRICK INDUSTR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and PATRICK INDUSTR.

Diversification Opportunities for BII Railway and PATRICK INDUSTR

0.28

Correlation Coefficient

BII Railway  PATRICK INDUSTR

Modest diversification

The 3 months correlation between BII and PATRICK is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and PATRICK INDUSTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PATRICK INDUSTR 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 PATRICK INDUSTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PATRICK INDUSTR has no effect on the direction of BII Railway i.e., BII Railway and PATRICK INDUSTR go up and down completely randomly.

Pair Corralation between BII Railway and PATRICK INDUSTR

Assuming the 90 days horizon BII Railway is expected to generate 5.25 times less return on investment than PATRICK INDUSTR. In addition to that, BII Railway is 1.58 times more volatile than PATRICK INDUSTR. It trades about 0.01 of its total potential returns per unit of risk. PATRICK INDUSTR is currently generating about 0.08 per unit of volatility. If you would invest  3,776  in PATRICK INDUSTR on September 27, 2024 and sell it today you would earn a total of  4,124  from holding PATRICK INDUSTR or generate 109.22% return on investment over 90 days.

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

BII Railway Transportation  vs.  PATRICK INDUSTR

BII Railway Transpor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PATRICK INDUSTR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PATRICK INDUSTR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PATRICK INDUSTR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BII Railway and PATRICK INDUSTR

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

The idea behind BII Railway Transportation and PATRICK INDUSTR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.