Correlation Between City Union and Bodhi Tree

Can any of the company-specific risk be diversified away by investing in both City Union and Bodhi Tree 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 City Union and Bodhi Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City Union Bank and Bodhi Tree Multimedia, you can compare the effects of market volatilities on City Union and Bodhi Tree 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 City Union with a short position of Bodhi Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Union and Bodhi Tree.

Diversification Opportunities for City Union and Bodhi Tree

0.61

Correlation Coefficient

City Union  Bodhi Tree

Poor diversification

The 3 months correlation between City and Bodhi is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and Bodhi Tree Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodhi Tree Multimedia and City Union 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 City Union Bank are associated (or correlated) with Bodhi Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodhi Tree Multimedia has no effect on the direction of City Union i.e., City Union and Bodhi Tree go up and down completely randomly.

Pair Corralation between City Union and Bodhi Tree

Assuming the 90 days trading horizon City Union Bank is expected to generate 0.48 times more return on investment than Bodhi Tree. However, City Union Bank is 2.08 times less risky than Bodhi Tree. It trades about -0.07 of its potential returns per unit of risk. Bodhi Tree Multimedia is currently generating about -0.09 per unit of risk. If you would invest  17,246  in City Union Bank on December 30, 2024 and sell it today you would lose (1,528) from holding City Union Bank or give up 8.86% of portfolio value over 90 days.

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

City Union Bank  vs.  Bodhi Tree Multimedia

City Union Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Union Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bodhi Tree Multimedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with City Union and Bodhi Tree

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

The idea behind City Union Bank and Bodhi Tree Multimedia 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.