Correlation Between Bus Online and Liaoning Dingjide

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

By analyzing existing cross correlation between Bus Online Co and Liaoning Dingjide Petrochemical, you can compare the effects of market volatilities on Bus Online and Liaoning Dingjide 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 Bus Online with a short position of Liaoning Dingjide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bus Online and Liaoning Dingjide.

Diversification Opportunities for Bus Online and Liaoning Dingjide

0.85

Correlation Coefficient

Bus Online  Liaoning Dingjide

Very poor diversification

The 3 months correlation between Bus and Liaoning is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bus Online Co and Liaoning Dingjide Petrochemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Dingjide and Bus Online 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 Bus Online Co are associated (or correlated) with Liaoning Dingjide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Dingjide has no effect on the direction of Bus Online i.e., Bus Online and Liaoning Dingjide go up and down completely randomly.

Pair Corralation between Bus Online and Liaoning Dingjide

Assuming the 90 days trading horizon Bus Online Co is expected to under-perform the Liaoning Dingjide. In addition to that, Bus Online is 1.08 times more volatile than Liaoning Dingjide Petrochemical. It trades about -0.06 of its total potential returns per unit of risk. Liaoning Dingjide Petrochemical is currently generating about 0.07 per unit of volatility. If you would invest  2,908  in Liaoning Dingjide Petrochemical on September 26, 2024 and sell it today you would earn a total of  206.00  from holding Liaoning Dingjide Petrochemical or generate 7.08% return on investment over 90 days.

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

Bus Online Co  vs.  Liaoning Dingjide Petrochemica

Bus Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bus Online Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bus Online is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Liaoning Dingjide

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liaoning Dingjide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bus Online and Liaoning Dingjide

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

The idea behind Bus Online Co and Liaoning Dingjide Petrochemical 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.