Correlation Between BES Engineering and Highwealth Construction

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

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

Diversification Opportunities for BES Engineering and Highwealth Construction

0.42

Correlation Coefficient

BES Engineering  Highwealth Construction

Very weak diversification

The 3 months correlation between BES and Highwealth is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BES Engineering Co and Highwealth Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwealth Construction and BES Engineering 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 BES Engineering Co are associated (or correlated) with Highwealth Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwealth Construction has no effect on the direction of BES Engineering i.e., BES Engineering and Highwealth Construction go up and down completely randomly.

Pair Corralation between BES Engineering and Highwealth Construction

Assuming the 90 days trading horizon BES Engineering Co is expected to under-perform the Highwealth Construction. But the stock apears to be less risky and, when comparing its historical volatility, BES Engineering Co is 1.95 times less risky than Highwealth Construction. The stock trades about -0.15 of its potential returns per unit of risk. The Highwealth Construction Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,410  in Highwealth Construction Corp on September 23, 2024 and sell it today you would lose (90.00) from holding Highwealth Construction Corp or give up 2.04% of portfolio value over 90 days.

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

BES Engineering Co  vs.  Highwealth Construction Corp

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 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.

Highwealth Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highwealth Construction Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highwealth Construction 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 BES Engineering and Highwealth Construction

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

The idea behind BES Engineering Co and Highwealth Construction Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.