Correlation Between StShine Optical and BizLink Holding

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

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

Diversification Opportunities for StShine Optical and BizLink Holding

0.55

Correlation Coefficient

StShine Optical  BizLink Holding

Very weak diversification

The 3 months correlation between StShine and BizLink is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding StShine Optical Co and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding and StShine Optical 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 StShine Optical Co are associated (or correlated) with BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of StShine Optical i.e., StShine Optical and BizLink Holding go up and down completely randomly.

Pair Corralation between StShine Optical and BizLink Holding

Assuming the 90 days trading horizon StShine Optical is expected to generate 4.4 times less return on investment than BizLink Holding. But when comparing it to its historical volatility, StShine Optical Co is 1.3 times less risky than BizLink Holding. It trades about 0.08 of its potential returns per unit of risk. BizLink Holding is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  41,300  in BizLink Holding on September 16, 2024 and sell it today you would earn a total of  29,000  from holding BizLink Holding or generate 70.22% return on investment over 90 days.

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

StShine Optical Co  vs.  BizLink Holding

StShine Optical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in StShine Optical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, StShine Optical showed solid returns over the last few months and may actually be approaching a breakup point.

BizLink Holding

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BizLink Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BizLink Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with StShine Optical and BizLink Holding

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

The idea behind StShine Optical Co and BizLink Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.