Correlation Between BII Railway and KAUFMAN ET

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

Diversification Opportunities for BII Railway and KAUFMAN ET

0.29

Correlation Coefficient

BII Railway  KAUFMAN ET

Modest diversification

The 3 months correlation between BII and KAUFMAN is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD 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 KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of BII Railway i.e., BII Railway and KAUFMAN ET go up and down completely randomly.

Pair Corralation between BII Railway and KAUFMAN ET

Assuming the 90 days horizon BII Railway is expected to generate 1.8 times less return on investment than KAUFMAN ET. In addition to that, BII Railway is 1.88 times more volatile than KAUFMAN ET BROAD. It trades about 0.01 of its total potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about 0.03 per unit of volatility. If you would invest  2,517  in KAUFMAN ET BROAD on October 4, 2024 and sell it today you would earn a total of  658.00  from holding KAUFMAN ET BROAD or generate 26.14% 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.  KAUFMAN ET BROAD

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KAUFMAN ET BROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KAUFMAN ET BROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, KAUFMAN ET is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BII Railway and KAUFMAN ET

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

The idea behind BII Railway Transportation and KAUFMAN ET BROAD 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 Global Correlations module to find global opportunities by holding instruments from different markets.