Correlation Between Bus Online and Olympic Circuit

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

Diversification Opportunities for Bus Online and Olympic Circuit

-0.06

Correlation Coefficient

Bus Online  Olympic Circuit

Good diversification

The 3 months correlation between Bus and Olympic is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bus Online Co and Olympic Circuit Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Circuit Tech 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 Olympic Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Circuit Tech has no effect on the direction of Bus Online i.e., Bus Online and Olympic Circuit go up and down completely randomly.

Pair Corralation between Bus Online and Olympic Circuit

Assuming the 90 days trading horizon Bus Online Co is expected to under-perform the Olympic Circuit. But the stock apears to be less risky and, when comparing its historical volatility, Bus Online Co is 1.22 times less risky than Olympic Circuit. The stock trades about -0.02 of its potential returns per unit of risk. The Olympic Circuit Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,929  in Olympic Circuit Technology on November 28, 2024 and sell it today you would earn a total of  928.00  from holding Olympic Circuit Technology or generate 31.68% return on investment over 90 days.

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

Bus Online Co  vs.  Olympic Circuit Technology

Bus Online

Risk-Adjusted Performance

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.

Olympic Circuit Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bus Online and Olympic Circuit

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

The idea behind Bus Online Co and Olympic Circuit Technology 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.