Correlation Between Bao Ngoc and Tienlen Steel

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

By analyzing existing cross correlation between Bao Ngoc Investment and Tienlen Steel Corp, you can compare the effects of market volatilities on Bao Ngoc and Tienlen Steel 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 Bao Ngoc with a short position of Tienlen Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bao Ngoc and Tienlen Steel.

Diversification Opportunities for Bao Ngoc and Tienlen Steel

-0.34

Correlation Coefficient

Bao Ngoc  Tienlen Steel

Very good diversification

The 3 months correlation between Bao and Tienlen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bao Ngoc Investment and Tienlen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tienlen Steel Corp and Bao Ngoc 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 Bao Ngoc Investment are associated (or correlated) with Tienlen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tienlen Steel Corp has no effect on the direction of Bao Ngoc i.e., Bao Ngoc and Tienlen Steel go up and down completely randomly.

Pair Corralation between Bao Ngoc and Tienlen Steel

Assuming the 90 days trading horizon Bao Ngoc Investment is expected to generate 1.12 times more return on investment than Tienlen Steel. However, Bao Ngoc is 1.12 times more volatile than Tienlen Steel Corp. It trades about 0.02 of its potential returns per unit of risk. Tienlen Steel Corp is currently generating about -0.02 per unit of risk. If you would invest  904,000  in Bao Ngoc Investment on October 4, 2024 and sell it today you would earn a total of  116,000  from holding Bao Ngoc Investment or generate 12.83% return on investment over 90 days.

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

Bao Ngoc Investment  vs.  Tienlen Steel Corp

Bao Ngoc Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bao Ngoc Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bao Ngoc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tienlen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tienlen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bao Ngoc and Tienlen Steel

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

The idea behind Bao Ngoc Investment and Tienlen Steel Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.