Correlation Between Champion Building and Buima

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

By analyzing existing cross correlation between Champion Building Materials and Buima Group, you can compare the effects of market volatilities on Champion Building and Buima 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 Champion Building with a short position of Buima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Buima.

Diversification Opportunities for Champion Building and Buima

0.34

Correlation Coefficient

Champion Building  Buima

Weak diversification

The 3 months correlation between Champion and Buima is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building Materials and Buima Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buima Group and Champion Building 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 Champion Building Materials are associated (or correlated) with Buima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buima Group has no effect on the direction of Champion Building i.e., Champion Building and Buima go up and down completely randomly.

Pair Corralation between Champion Building and Buima

Assuming the 90 days trading horizon Champion Building Materials is expected to generate 0.84 times more return on investment than Buima. However, Champion Building Materials is 1.19 times less risky than Buima. It trades about 0.02 of its potential returns per unit of risk. Buima Group is currently generating about -0.06 per unit of risk. If you would invest  893.00  in Champion Building Materials on October 3, 2024 and sell it today you would earn a total of  90.00  from holding Champion Building Materials or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.36%
Values	Daily Returns

Champion Building Materials  vs.  Buima Group

Champion Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Buima Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buima Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Champion Building and Buima

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

The idea behind Champion Building Materials and Buima Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.