Correlation Between BII Railway and GungHo Online

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

Diversification Opportunities for BII Railway and GungHo Online

0.39

Correlation Coefficient

BII Railway  GungHo Online

Weak diversification

The 3 months correlation between BII and GungHo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert 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 GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of BII Railway i.e., BII Railway and GungHo Online go up and down completely randomly.

Pair Corralation between BII Railway and GungHo Online

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.59 times more return on investment than GungHo Online. However, BII Railway Transportation is 1.7 times less risky than GungHo Online. It trades about -0.06 of its potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.05 per unit of risk. If you would invest  2.80  in BII Railway Transportation on October 24, 2024 and sell it today you would lose (0.05) from holding BII Railway Transportation or give up 1.79% of portfolio value over 90 days.

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

BII Railway Transportation  vs.  GungHo Online Entertainment

BII Railway Transpor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 5 (%) 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 February 2025.

GungHo Online Entert

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BII Railway and GungHo Online

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

The idea behind BII Railway Transportation and GungHo Online Entertainment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.