Correlation Between BII Railway and Wisetech Global

Can any of the company-specific risk be diversified away by investing in both BII Railway and Wisetech Global 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 Wisetech Global 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 Wisetech Global, you can compare the effects of market volatilities on BII Railway and Wisetech Global 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 Wisetech Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Wisetech Global.

Diversification Opportunities for BII Railway and Wisetech Global

0.21

Correlation Coefficient

BII Railway  Wisetech Global

Modest diversification

The 3 months correlation between BII and Wisetech is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Wisetech Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisetech Global 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 Wisetech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisetech Global has no effect on the direction of BII Railway i.e., BII Railway and Wisetech Global go up and down completely randomly.

Pair Corralation between BII Railway and Wisetech Global

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.89 times more return on investment than Wisetech Global. However, BII Railway Transportation is 1.13 times less risky than Wisetech Global. It trades about 0.25 of its potential returns per unit of risk. Wisetech Global is currently generating about -0.11 per unit of risk. If you would invest  2.65  in BII Railway Transportation on October 10, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.55% return on investment over 90 days.

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

BII Railway Transportation  vs.  Wisetech Global

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Wisetech Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BII Railway and Wisetech Global

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

The idea behind BII Railway Transportation and Wisetech Global 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.