Correlation Between Bangyan Technology and China Express

Can any of the company-specific risk be diversified away by investing in both Bangyan Technology and China Express 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 Bangyan Technology and China Express into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bangyan Technology Co and China Express Airlines, you can compare the effects of market volatilities on Bangyan Technology and China Express 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 Bangyan Technology with a short position of China Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bangyan Technology and China Express.

Diversification Opportunities for Bangyan Technology and China Express

0.3

Correlation Coefficient

Bangyan Technology  China Express

Weak diversification

The 3 months correlation between Bangyan and China is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bangyan Technology Co and China Express Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Express Airlines and Bangyan Technology 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 Bangyan Technology Co are associated (or correlated) with China Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Express Airlines has no effect on the direction of Bangyan Technology i.e., Bangyan Technology and China Express go up and down completely randomly.

Pair Corralation between Bangyan Technology and China Express

Assuming the 90 days trading horizon Bangyan Technology Co is expected to generate 2.05 times more return on investment than China Express. However, Bangyan Technology is 2.05 times more volatile than China Express Airlines. It trades about 0.02 of its potential returns per unit of risk. China Express Airlines is currently generating about -0.18 per unit of risk. If you would invest  1,587  in Bangyan Technology Co on October 6, 2024 and sell it today you would earn a total of  13.00  from holding Bangyan Technology Co or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Bangyan Technology Co  vs.  China Express Airlines

Bangyan Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangyan Technology Co 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.

China Express Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Express Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bangyan Technology and China Express

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

The idea behind Bangyan Technology Co and China Express Airlines 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.