Correlation Between BII Railway and GLG LIFE

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

Diversification Opportunities for BII Railway and GLG LIFE

0.0

Correlation Coefficient

BII Railway  GLG LIFE

Pay attention - limited upside

The 3 months correlation between BII and GLG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and GLG LIFE TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLG LIFE TECH 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 GLG LIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLG LIFE TECH has no effect on the direction of BII Railway i.e., BII Railway and GLG LIFE go up and down completely randomly.

Pair Corralation between BII Railway and GLG LIFE

Assuming the 90 days horizon BII Railway is expected to generate 85.51 times less return on investment than GLG LIFE. But when comparing it to its historical volatility, BII Railway Transportation is 13.4 times less risky than GLG LIFE. It trades about 0.01 of its potential returns per unit of risk. GLG LIFE TECH is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.40  in GLG LIFE TECH on October 4, 2024 and sell it today you would earn a total of  0.60  from holding GLG LIFE TECH or generate 42.86% return on investment over 90 days.

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

BII Railway Transportation  vs.  GLG LIFE TECH

BII Railway Transpor

Risk-Adjusted Performance

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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.

GLG LIFE TECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GLG LIFE TECH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GLG LIFE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BII Railway and GLG LIFE

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

The idea behind BII Railway Transportation and GLG LIFE TECH 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.