Correlation Between BII Railway and USWE SPORTS

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

Diversification Opportunities for BII Railway and USWE SPORTS

0.12

Correlation Coefficient

BII Railway  USWE SPORTS

Average diversification

The 3 months correlation between BII and USWE is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB 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 USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of BII Railway i.e., BII Railway and USWE SPORTS go up and down completely randomly.

Pair Corralation between BII Railway and USWE SPORTS

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.67 times more return on investment than USWE SPORTS. However, BII Railway Transportation is 1.5 times less risky than USWE SPORTS. It trades about 0.04 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about 0.02 per unit of risk. If you would invest  2.80  in BII Railway Transportation on December 27, 2024 and sell it today you would earn a total of  0.10  from holding BII Railway Transportation or generate 3.57% return on investment over 90 days.

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

BII Railway Transportation  vs.  USWE SPORTS AB

BII Railway Transpor

Risk-Adjusted Performance

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 stable basic indicators, BII Railway is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

USWE SPORTS AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USWE SPORTS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BII Railway and USWE SPORTS

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

The idea behind BII Railway Transportation and USWE SPORTS AB 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.