Correlation Between BEC World and Dynasty Ceramic

Can any of the company-specific risk be diversified away by investing in both BEC World and Dynasty Ceramic 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 BEC World and Dynasty Ceramic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BEC World Public and Dynasty Ceramic Public, you can compare the effects of market volatilities on BEC World and Dynasty Ceramic 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 BEC World with a short position of Dynasty Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEC World and Dynasty Ceramic.

Diversification Opportunities for BEC World and Dynasty Ceramic

0.61

Correlation Coefficient

BEC World  Dynasty Ceramic

Poor diversification

The 3 months correlation between BEC and Dynasty is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BEC World Public and Dynasty Ceramic Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynasty Ceramic Public and BEC World 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 BEC World Public are associated (or correlated) with Dynasty Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynasty Ceramic Public has no effect on the direction of BEC World i.e., BEC World and Dynasty Ceramic go up and down completely randomly.

Pair Corralation between BEC World and Dynasty Ceramic

Assuming the 90 days trading horizon BEC World Public is expected to generate 0.57 times more return on investment than Dynasty Ceramic. However, BEC World Public is 1.75 times less risky than Dynasty Ceramic. It trades about -0.09 of its potential returns per unit of risk. Dynasty Ceramic Public is currently generating about -0.18 per unit of risk. If you would invest  394.00  in BEC World Public on October 20, 2024 and sell it today you would lose (14.00) from holding BEC World Public or give up 3.55% of portfolio value over 90 days.

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

BEC World Public  vs.  Dynasty Ceramic Public

BEC World Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEC World Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dynasty Ceramic Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynasty Ceramic Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BEC World and Dynasty Ceramic

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

The idea behind BEC World Public and Dynasty Ceramic Public 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.