Correlation Between BOC Aviation and Fortress Transportation

Can any of the company-specific risk be diversified away by investing in both BOC Aviation and Fortress Transportation 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 BOC Aviation and Fortress Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BOC Aviation Limited and Fortress Transportation and, you can compare the effects of market volatilities on BOC Aviation and Fortress Transportation 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 BOC Aviation with a short position of Fortress Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOC Aviation and Fortress Transportation.

Diversification Opportunities for BOC Aviation and Fortress Transportation

-0.6

Correlation Coefficient

BOC Aviation  Fortress Transportation

Excellent diversification

The 3 months correlation between BOC and Fortress is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BOC Aviation Limited and Fortress Transportation and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Transportation and BOC Aviation 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 BOC Aviation Limited are associated (or correlated) with Fortress Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Transportation has no effect on the direction of BOC Aviation i.e., BOC Aviation and Fortress Transportation go up and down completely randomly.

Pair Corralation between BOC Aviation and Fortress Transportation

Assuming the 90 days horizon BOC Aviation Limited is expected to generate 12.67 times more return on investment than Fortress Transportation. However, BOC Aviation is 12.67 times more volatile than Fortress Transportation and. It trades about 0.21 of its potential returns per unit of risk. Fortress Transportation and is currently generating about 0.66 per unit of risk. If you would invest  748.00  in BOC Aviation Limited on December 5, 2024 and sell it today you would earn a total of  12.00  from holding BOC Aviation Limited or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

BOC Aviation Limited  vs.  Fortress Transportation and

BOC Aviation Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BOC Aviation Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BOC Aviation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fortress Transportation

Risk-Adjusted Performance

OK

Over the last 90 days Fortress Transportation and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Fortress Transportation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BOC Aviation and Fortress Transportation

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

The idea behind BOC Aviation Limited and Fortress Transportation and 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.