Correlation Between BES Engineering and Te Chang

Can any of the company-specific risk be diversified away by investing in both BES Engineering and Te Chang 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 Te Chang 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 Te Chang Construction, you can compare the effects of market volatilities on BES Engineering and Te Chang 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 Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of BES Engineering and Te Chang.

Diversification Opportunities for BES Engineering and Te Chang

-0.75

Correlation Coefficient

BES Engineering  Te Chang

Pay attention - limited upside

The 3 months correlation between BES and 5511 is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BES Engineering Co and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of BES Engineering i.e., BES Engineering and Te Chang go up and down completely randomly.

Pair Corralation between BES Engineering and Te Chang

Assuming the 90 days trading horizon BES Engineering Co is expected to under-perform the Te Chang. In addition to that, BES Engineering is 1.36 times more volatile than Te Chang Construction. It trades about -0.03 of its total potential returns per unit of risk. Te Chang Construction is currently generating about -0.01 per unit of volatility. If you would invest  6,668  in Te Chang Construction on September 20, 2024 and sell it today you would lose (388.00) from holding Te Chang Construction or give up 5.82% of portfolio value over 90 days.

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

BES Engineering Co  vs.  Te Chang Construction

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Te Chang Construction

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BES Engineering and Te Chang

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

The idea behind BES Engineering Co and Te Chang Construction 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.