Correlation Between Bawany Air and Bestway Cement

Can any of the company-specific risk be diversified away by investing in both Bawany Air and Bestway Cement 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 Bawany Air and Bestway Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bawany Air Products and Bestway Cement, you can compare the effects of market volatilities on Bawany Air and Bestway Cement 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 Bawany Air with a short position of Bestway Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bawany Air and Bestway Cement.

Diversification Opportunities for Bawany Air and Bestway Cement

-0.46

Correlation Coefficient

Bawany Air  Bestway Cement

Very good diversification

The 3 months correlation between Bawany and Bestway is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bawany Air Products and Bestway Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bestway Cement and Bawany Air 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 Bawany Air Products are associated (or correlated) with Bestway Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bestway Cement has no effect on the direction of Bawany Air i.e., Bawany Air and Bestway Cement go up and down completely randomly.

Pair Corralation between Bawany Air and Bestway Cement

Assuming the 90 days trading horizon Bawany Air Products is expected to under-perform the Bestway Cement. In addition to that, Bawany Air is 2.67 times more volatile than Bestway Cement. It trades about -0.2 of its total potential returns per unit of risk. Bestway Cement is currently generating about 0.16 per unit of volatility. If you would invest  33,477  in Bestway Cement on December 24, 2024 and sell it today you would earn a total of  4,583  from holding Bestway Cement or generate 13.69% return on investment over 90 days.

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

Bawany Air Products  vs.  Bestway Cement

Bawany Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bawany Air Products 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bestway Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bestway Cement are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bestway Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bawany Air and Bestway Cement

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

The idea behind Bawany Air Products and Bestway Cement 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.