Correlation Between XiAn Dagang and BCEG Environmental

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

By analyzing existing cross correlation between XiAn Dagang Road and BCEG Environmental Remediation, you can compare the effects of market volatilities on XiAn Dagang and BCEG Environmental 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 XiAn Dagang with a short position of BCEG Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of XiAn Dagang and BCEG Environmental.

Diversification Opportunities for XiAn Dagang and BCEG Environmental

0.77

Correlation Coefficient

XiAn Dagang  BCEG Environmental

Poor diversification

The 3 months correlation between XiAn and BCEG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding XiAn Dagang Road and BCEG Environmental Remediation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCEG Environmental and XiAn Dagang 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 XiAn Dagang Road are associated (or correlated) with BCEG Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCEG Environmental has no effect on the direction of XiAn Dagang i.e., XiAn Dagang and BCEG Environmental go up and down completely randomly.

Pair Corralation between XiAn Dagang and BCEG Environmental

Assuming the 90 days trading horizon XiAn Dagang Road is expected to under-perform the BCEG Environmental. In addition to that, XiAn Dagang is 1.63 times more volatile than BCEG Environmental Remediation. It trades about -0.12 of its total potential returns per unit of risk. BCEG Environmental Remediation is currently generating about -0.05 per unit of volatility. If you would invest  1,251  in BCEG Environmental Remediation on October 23, 2024 and sell it today you would lose (108.00) from holding BCEG Environmental Remediation or give up 8.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

XiAn Dagang Road  vs.  BCEG Environmental Remediation

XiAn Dagang Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XiAn Dagang Road has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BCEG Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCEG Environmental Remediation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with XiAn Dagang and BCEG Environmental

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

The idea behind XiAn Dagang Road and BCEG Environmental Remediation 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.