Correlation Between BCEG Environmental and XiAn Dagang

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

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

Diversification Opportunities for BCEG Environmental and XiAn Dagang

0.87

Correlation Coefficient

BCEG Environmental  XiAn Dagang

Very poor diversification

The 3 months correlation between BCEG and XiAn is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BCEG Environmental Remediation and XiAn Dagang Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XiAn Dagang Road and BCEG Environmental 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 BCEG Environmental Remediation are associated (or correlated) with XiAn Dagang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XiAn Dagang Road has no effect on the direction of BCEG Environmental i.e., BCEG Environmental and XiAn Dagang go up and down completely randomly.

Pair Corralation between BCEG Environmental and XiAn Dagang

Assuming the 90 days trading horizon BCEG Environmental is expected to generate 1.33 times less return on investment than XiAn Dagang. But when comparing it to its historical volatility, BCEG Environmental Remediation is 2.5 times less risky than XiAn Dagang. It trades about 0.04 of its potential returns per unit of risk. XiAn Dagang Road is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  660.00  in XiAn Dagang Road on December 24, 2024 and sell it today you would earn a total of  6.00  from holding XiAn Dagang Road or generate 0.91% return on investment over 90 days.

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

BCEG Environmental Remediation  vs.  XiAn Dagang Road

BCEG Environmental

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCEG Environmental Remediation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BCEG Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

XiAn Dagang Road

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XiAn Dagang Road are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XiAn Dagang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BCEG Environmental and XiAn Dagang

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

The idea behind BCEG Environmental Remediation and XiAn Dagang Road 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.