Correlation Between Phoenix and BAIC

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

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

Diversification Opportunities for Phoenix and BAIC

0.48

Correlation Coefficient

Phoenix  BAIC

Very weak diversification

The 3 months correlation between Phoenix and BAIC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Motor Common and BAIC Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIC Motor and Phoenix 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 Phoenix Motor Common are associated (or correlated) with BAIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIC Motor has no effect on the direction of Phoenix i.e., Phoenix and BAIC go up and down completely randomly.

Pair Corralation between Phoenix and BAIC

Considering the 90-day investment horizon Phoenix Motor Common is expected to generate 4.93 times more return on investment than BAIC. However, Phoenix is 4.93 times more volatile than BAIC Motor. It trades about 0.04 of its potential returns per unit of risk. BAIC Motor is currently generating about 0.07 per unit of risk. If you would invest  45.00  in Phoenix Motor Common on September 16, 2024 and sell it today you would lose (14.00) from holding Phoenix Motor Common or give up 31.11% of portfolio value over 90 days.

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

Phoenix Motor Common  vs.  BAIC Motor

Phoenix Motor Common

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Motor Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Phoenix showed solid returns over the last few months and may actually be approaching a breakup point.

BAIC Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BAIC Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, BAIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix and BAIC

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

The idea behind Phoenix Motor Common and BAIC Motor 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.