Correlation Between Country Garden and Bayport International

Can any of the company-specific risk be diversified away by investing in both Country Garden and Bayport International 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 Country Garden and Bayport International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Country Garden Holdings and Bayport International Holdings, you can compare the effects of market volatilities on Country Garden and Bayport International 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 Country Garden with a short position of Bayport International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Country Garden and Bayport International.

Diversification Opportunities for Country Garden and Bayport International

-0.25

Correlation Coefficient

Country Garden  Bayport International

Very good diversification

The 3 months correlation between Country and Bayport is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Country Garden Holdings and Bayport International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayport International and Country Garden 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 Country Garden Holdings are associated (or correlated) with Bayport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayport International has no effect on the direction of Country Garden i.e., Country Garden and Bayport International go up and down completely randomly.

Pair Corralation between Country Garden and Bayport International

Assuming the 90 days horizon Country Garden is expected to generate 1.08 times less return on investment than Bayport International. But when comparing it to its historical volatility, Country Garden Holdings is 1.99 times less risky than Bayport International. It trades about 0.1 of its potential returns per unit of risk. Bayport International Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Bayport International Holdings on October 7, 2024 and sell it today you would lose (0.01) from holding Bayport International Holdings or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.51%
Values	Daily Returns

Country Garden Holdings  vs.  Bayport International Holdings

Country Garden Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

Bayport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Country Garden and Bayport International

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

The idea behind Country Garden Holdings and Bayport International Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.