Correlation Between BII Railway and STORE ELECTRONIC

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

Diversification Opportunities for BII Railway and STORE ELECTRONIC

0.29

Correlation Coefficient

BII Railway  STORE ELECTRONIC

Modest diversification

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

Pair Corralation between BII Railway and STORE ELECTRONIC

Assuming the 90 days horizon BII Railway Transportation is expected to under-perform the STORE ELECTRONIC. In addition to that, BII Railway is 1.12 times more volatile than STORE ELECTRONIC. It trades about -0.05 of its total potential returns per unit of risk. STORE ELECTRONIC is currently generating about 0.11 per unit of volatility. If you would invest  14,910  in STORE ELECTRONIC on October 3, 2024 and sell it today you would earn a total of  2,570  from holding STORE ELECTRONIC or generate 17.24% 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.  STORE ELECTRONIC

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.

STORE ELECTRONIC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STORE ELECTRONIC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, STORE ELECTRONIC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and STORE ELECTRONIC

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

The idea behind BII Railway Transportation and STORE ELECTRONIC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.