Correlation Between Action Construction and Bodhi Tree

Can any of the company-specific risk be diversified away by investing in both Action Construction and Bodhi Tree 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 Action Construction and Bodhi Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Action Construction Equipment and Bodhi Tree Multimedia, you can compare the effects of market volatilities on Action Construction and Bodhi Tree 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 Action Construction with a short position of Bodhi Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Action Construction and Bodhi Tree.

Diversification Opportunities for Action Construction and Bodhi Tree

0.24

Correlation Coefficient

Action Construction  Bodhi Tree

Modest diversification

The 3 months correlation between Action and Bodhi is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Action Construction Equipment and Bodhi Tree Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodhi Tree Multimedia and Action Construction 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 Action Construction Equipment are associated (or correlated) with Bodhi Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodhi Tree Multimedia has no effect on the direction of Action Construction i.e., Action Construction and Bodhi Tree go up and down completely randomly.

Pair Corralation between Action Construction and Bodhi Tree

Assuming the 90 days trading horizon Action Construction Equipment is expected to generate 0.87 times more return on investment than Bodhi Tree. However, Action Construction Equipment is 1.15 times less risky than Bodhi Tree. It trades about 0.05 of its potential returns per unit of risk. Bodhi Tree Multimedia is currently generating about -0.07 per unit of risk. If you would invest  127,915  in Action Construction Equipment on September 4, 2024 and sell it today you would earn a total of  7,485  from holding Action Construction Equipment or generate 5.85% return on investment over 90 days.

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

Action Construction Equipment  vs.  Bodhi Tree Multimedia

Action Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Action Construction Equipment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Action Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Action Construction and Bodhi Tree

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

The idea behind Action Construction Equipment and Bodhi Tree Multimedia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.