Correlation Between Farglory Land and BES Engineering

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

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

Diversification Opportunities for Farglory Land and BES Engineering

0.1

Correlation Coefficient

Farglory Land  BES Engineering

Average diversification

The 3 months correlation between Farglory and BES is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Farglory Land Development and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering and Farglory Land 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 Farglory Land Development 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 Farglory Land i.e., Farglory Land and BES Engineering go up and down completely randomly.

Pair Corralation between Farglory Land and BES Engineering

Assuming the 90 days trading horizon Farglory Land Development is expected to generate 1.04 times more return on investment than BES Engineering. However, Farglory Land is 1.04 times more volatile than BES Engineering Co. It trades about 0.05 of its potential returns per unit of risk. BES Engineering Co is currently generating about 0.01 per unit of risk. If you would invest  5,840  in Farglory Land Development on September 26, 2024 and sell it today you would earn a total of  2,070  from holding Farglory Land Development or generate 35.45% return on investment over 90 days.

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

Farglory Land Development  vs.  BES Engineering Co

Farglory Land Development

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Land Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Land showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Farglory Land and BES Engineering

The main advantage of trading using opposite Farglory Land and BES Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farglory Land 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.

The idea behind Farglory Land Development and BES Engineering Co 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..