Correlation Between Kuo Yang and BES Engineering

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

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

Diversification Opportunities for Kuo Yang and BES Engineering

0.29

Correlation Coefficient

Kuo Yang  BES Engineering

Modest diversification

The 3 months correlation between Kuo and BES is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kuo Yang Construction and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering and Kuo Yang 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 Kuo Yang Construction are associated (or correlated) with BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of Kuo Yang i.e., Kuo Yang and BES Engineering go up and down completely randomly.

Pair Corralation between Kuo Yang and BES Engineering

Assuming the 90 days trading horizon Kuo Yang Construction is expected to under-perform the BES Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Kuo Yang Construction is 1.09 times less risky than BES Engineering. The stock trades about -0.08 of its potential returns per unit of risk. The BES Engineering Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,125  in BES Engineering Co on October 20, 2024 and sell it today you would lose (65.00) from holding BES Engineering Co or give up 5.78% of portfolio value over 90 days.

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

Kuo Yang Construction  vs.  BES Engineering Co

Kuo Yang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuo Yang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

BES Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BES Engineering Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BES Engineering is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kuo Yang and BES Engineering

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

The idea behind Kuo Yang Construction and BES Engineering 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 Commodity Directory module to find actively traded commodities issued by global exchanges.