Correlation Between Bich Chi and SMC Investment

Can any of the company-specific risk be diversified away by investing in both Bich Chi and SMC Investment 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 Bich Chi and SMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bich Chi Food and SMC Investment Trading, you can compare the effects of market volatilities on Bich Chi and SMC Investment 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 Bich Chi with a short position of SMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bich Chi and SMC Investment.

Diversification Opportunities for Bich Chi and SMC Investment

-0.33

Correlation Coefficient

Bich Chi  SMC Investment

Very good diversification

The 3 months correlation between Bich and SMC is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bich Chi Food and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading and Bich Chi 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 Bich Chi Food are associated (or correlated) with SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of Bich Chi i.e., Bich Chi and SMC Investment go up and down completely randomly.

Pair Corralation between Bich Chi and SMC Investment

Assuming the 90 days trading horizon Bich Chi is expected to generate 1.68 times less return on investment than SMC Investment. But when comparing it to its historical volatility, Bich Chi Food is 1.05 times less risky than SMC Investment. It trades about 0.16 of its potential returns per unit of risk. SMC Investment Trading is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  695,000  in SMC Investment Trading on September 22, 2024 and sell it today you would earn a total of  109,000  from holding SMC Investment Trading or generate 15.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.09%
Values	Daily Returns

Bich Chi Food  vs.  SMC Investment Trading

Bich Chi Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bich Chi Food are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Bich Chi displayed solid returns over the last few months and may actually be approaching a breakup point.

SMC Investment Trading

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Bich Chi and SMC Investment

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

The idea behind Bich Chi Food and SMC Investment Trading 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.