Correlation Between Bohai Leasing and Empyrean Technology

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

By analyzing existing cross correlation between Bohai Leasing Co and Empyrean Technology Co, you can compare the effects of market volatilities on Bohai Leasing and Empyrean Technology 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 Bohai Leasing with a short position of Empyrean Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohai Leasing and Empyrean Technology.

Diversification Opportunities for Bohai Leasing and Empyrean Technology

0.77

Correlation Coefficient

Bohai Leasing  Empyrean Technology

Poor diversification

The 3 months correlation between Bohai and Empyrean is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bohai Leasing Co and Empyrean Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empyrean Technology and Bohai Leasing 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 Bohai Leasing Co are associated (or correlated) with Empyrean Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empyrean Technology has no effect on the direction of Bohai Leasing i.e., Bohai Leasing and Empyrean Technology go up and down completely randomly.

Pair Corralation between Bohai Leasing and Empyrean Technology

Assuming the 90 days trading horizon Bohai Leasing Co is expected to under-perform the Empyrean Technology. But the stock apears to be less risky and, when comparing its historical volatility, Bohai Leasing Co is 2.01 times less risky than Empyrean Technology. The stock trades about -0.51 of its potential returns per unit of risk. The Empyrean Technology Co is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  12,322  in Empyrean Technology Co on October 9, 2024 and sell it today you would lose (1,814) from holding Empyrean Technology Co or give up 14.72% of portfolio value over 90 days.

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

Bohai Leasing Co  vs.  Empyrean Technology Co

Bohai Leasing

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bohai Leasing Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bohai Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Empyrean Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empyrean Technology Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Empyrean Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bohai Leasing and Empyrean Technology

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

The idea behind Bohai Leasing Co and Empyrean Technology Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.