Correlation Between Weiss Korea and Bodycote PLC

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

By analyzing existing cross correlation between Weiss Korea Opportunity and Bodycote PLC, you can compare the effects of market volatilities on Weiss Korea and Bodycote PLC 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 Weiss Korea with a short position of Bodycote PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weiss Korea and Bodycote PLC.

Diversification Opportunities for Weiss Korea and Bodycote PLC

-0.91

Correlation Coefficient

Weiss Korea  Bodycote PLC

Pay attention - limited upside

The 3 months correlation between Weiss and Bodycote is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Weiss Korea Opportunity and Bodycote PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodycote PLC and Weiss Korea 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 Weiss Korea Opportunity are associated (or correlated) with Bodycote PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodycote PLC has no effect on the direction of Weiss Korea i.e., Weiss Korea and Bodycote PLC go up and down completely randomly.

Pair Corralation between Weiss Korea and Bodycote PLC

Assuming the 90 days trading horizon Weiss Korea Opportunity is expected to under-perform the Bodycote PLC. In addition to that, Weiss Korea is 1.52 times more volatile than Bodycote PLC. It trades about -0.06 of its total potential returns per unit of risk. Bodycote PLC is currently generating about 0.06 per unit of volatility. If you would invest  58,909  in Bodycote PLC on September 24, 2024 and sell it today you would earn a total of  3,591  from holding Bodycote PLC or generate 6.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Weiss Korea Opportunity  vs.  Bodycote PLC

Weiss Korea Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weiss Korea Opportunity 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.

Bodycote PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bodycote PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bodycote PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Weiss Korea and Bodycote PLC

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

The idea behind Weiss Korea Opportunity and Bodycote PLC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.