Correlation Between B Investments and Iron

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

By analyzing existing cross correlation between B Investments Holding and Iron And Steel, you can compare the effects of market volatilities on B Investments and Iron 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 B Investments with a short position of Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Investments and Iron.

Diversification Opportunities for B Investments and Iron

-0.42

Correlation Coefficient

B Investments  Iron

Very good diversification

The 3 months correlation between BINV and Iron is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding B Investments Holding and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel and B Investments 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 B Investments Holding are associated (or correlated) with Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of B Investments i.e., B Investments and Iron go up and down completely randomly.

Pair Corralation between B Investments and Iron

Assuming the 90 days trading horizon B Investments Holding is expected to under-perform the Iron. But the stock apears to be less risky and, when comparing its historical volatility, B Investments Holding is 3.9 times less risky than Iron. The stock trades about -0.05 of its potential returns per unit of risk. The Iron And Steel is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Iron And Steel on December 29, 2024 and sell it today you would earn a total of  220.00  from holding Iron And Steel or generate 56.41% return on investment over 90 days.

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

B Investments Holding  vs.  Iron And Steel

B Investments Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days B Investments Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, B Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iron And Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iron And Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with B Investments and Iron

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

The idea behind B Investments Holding and Iron And Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.