Correlation Between BII Railway and Xero

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Can any of the company-specific risk be diversified away by investing in both BII Railway and Xero 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 BII Railway and Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Xero, you can compare the effects of market volatilities on BII Railway and Xero 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 BII Railway with a short position of Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Xero.

Diversification Opportunities for BII Railway and Xero

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between BII and Xero is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and BII Railway 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 BII Railway Transportation are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of BII Railway i.e., BII Railway and Xero go up and down completely randomly.

Pair Corralation between BII Railway and Xero

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.83 times more return on investment than Xero. However, BII Railway Transportation is 1.2 times less risky than Xero. It trades about 0.23 of its potential returns per unit of risk. Xero is currently generating about -0.26 per unit of risk. If you would invest  2.60  in BII Railway Transportation on September 27, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

BII Railway Transportation  vs.  Xero

 Performance 
       Timeline  
BII Railway Transpor 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Xero 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xero may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BII Railway and Xero Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BII Railway and Xero

The main advantage of trading using opposite BII Railway and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.
The idea behind BII Railway Transportation and Xero 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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