Correlation Between Bayport International and Holiday Island

Can any of the company-specific risk be diversified away by investing in both Bayport International and Holiday Island 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 Bayport International and Holiday Island into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bayport International Holdings and Holiday Island Holdings, you can compare the effects of market volatilities on Bayport International and Holiday Island 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 Bayport International with a short position of Holiday Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayport International and Holiday Island.

Diversification Opportunities for Bayport International and Holiday Island

0.15

Correlation Coefficient

Bayport International  Holiday Island

Average diversification

The 3 months correlation between Bayport and Holiday is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bayport International Holdings and Holiday Island Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Island Holdings and Bayport International 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 Bayport International Holdings are associated (or correlated) with Holiday Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Island Holdings has no effect on the direction of Bayport International i.e., Bayport International and Holiday Island go up and down completely randomly.

Pair Corralation between Bayport International and Holiday Island

Given the investment horizon of 90 days Bayport International Holdings is expected to under-perform the Holiday Island. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bayport International Holdings is 1.83 times less risky than Holiday Island. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Holiday Island Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Holiday Island Holdings on September 1, 2024 and sell it today you would lose (0.50) from holding Holiday Island Holdings or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bayport International Holdings  vs.  Holiday Island Holdings

Bayport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Holiday Island Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayport International and Holiday Island

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

The idea behind Bayport International Holdings and Holiday Island Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..