Correlation Between Tway Air and BHI

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

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

Diversification Opportunities for Tway Air and BHI

0.39

Correlation Coefficient

Tway Air  BHI

Weak diversification

The 3 months correlation between Tway and BHI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and BHI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHI Co and Tway Air 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 Tway Air Co are associated (or correlated) with BHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHI Co has no effect on the direction of Tway Air i.e., Tway Air and BHI go up and down completely randomly.

Pair Corralation between Tway Air and BHI

Assuming the 90 days trading horizon Tway Air Co is expected to under-perform the BHI. In addition to that, Tway Air is 1.04 times more volatile than BHI Co. It trades about -0.01 of its total potential returns per unit of risk. BHI Co is currently generating about 0.12 per unit of volatility. If you would invest  1,543,000  in BHI Co on December 21, 2024 and sell it today you would earn a total of  472,000  from holding BHI Co or generate 30.59% return on investment over 90 days.

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

Tway Air Co  vs.  BHI Co

Tway Air

Risk-Adjusted Performance

Very Weak

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

BHI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHI Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BHI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tway Air and BHI

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

The idea behind Tway Air Co and BHI 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.