Correlation Between Bodhi Tree and Transport

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

By analyzing existing cross correlation between Bodhi Tree Multimedia and Transport of, you can compare the effects of market volatilities on Bodhi Tree and Transport 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 Bodhi Tree with a short position of Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and Transport.

Diversification Opportunities for Bodhi Tree and Transport

-0.33

Correlation Coefficient

Bodhi Tree  Transport

Very good diversification

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

Pair Corralation between Bodhi Tree and Transport

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to generate 2.83 times more return on investment than Transport. However, Bodhi Tree is 2.83 times more volatile than Transport of. It trades about 0.09 of its potential returns per unit of risk. Transport of is currently generating about -0.37 per unit of risk. If you would invest  1,202  in Bodhi Tree Multimedia on October 10, 2024 and sell it today you would earn a total of  87.00  from holding Bodhi Tree Multimedia or generate 7.24% return on investment over 90 days.

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

Bodhi Tree Multimedia  vs.  Transport of

Bodhi Tree Multimedia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bodhi Tree Multimedia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bodhi Tree may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Transport

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with Bodhi Tree and Transport

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

The idea behind Bodhi Tree Multimedia and Transport of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.