Correlation Between Wan Hai and BES Engineering
Can any of the company-specific risk be diversified away by investing in both Wan Hai 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 Wan Hai and BES Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and BES Engineering Co, you can compare the effects of market volatilities on Wan Hai 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 Wan Hai with a short position of BES Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and BES Engineering.
Diversification Opportunities for Wan Hai and BES Engineering
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wan and BES is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering and Wan Hai 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 Wan Hai Lines 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 Wan Hai i.e., Wan Hai and BES Engineering go up and down completely randomly.
Pair Corralation between Wan Hai and BES Engineering
Assuming the 90 days trading horizon Wan Hai is expected to generate 1.24 times less return on investment than BES Engineering. In addition to that, Wan Hai is 1.12 times more volatile than BES Engineering Co. It trades about 0.03 of its total potential returns per unit of risk. BES Engineering Co is currently generating about 0.05 per unit of volatility. If you would invest 1,100 in BES Engineering Co on December 27, 2024 and sell it today you would earn a total of 45.00 from holding BES Engineering Co or generate 4.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Wan Hai Lines vs. BES Engineering Co
Performance |
Timeline |
Wan Hai Lines |
BES Engineering |
Wan Hai and BES Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wan Hai and BES Engineering
The main advantage of trading using opposite Wan Hai and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai 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.Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
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Check out your portfolio center.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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