Correlation Between INTERSHOP Communications and BII Railway

Can any of the company-specific risk be diversified away by investing in both INTERSHOP Communications and BII Railway 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 INTERSHOP Communications and BII Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTERSHOP Communications Aktiengesellschaft and BII Railway Transportation, you can compare the effects of market volatilities on INTERSHOP Communications and BII Railway 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 INTERSHOP Communications with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERSHOP Communications and BII Railway.

Diversification Opportunities for INTERSHOP Communications and BII Railway

-0.69

Correlation Coefficient

INTERSHOP Communications  BII Railway

Excellent diversification

The 3 months correlation between INTERSHOP and BII is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and BII Railway go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and BII Railway

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to under-perform the BII Railway. In addition to that, INTERSHOP Communications is 1.89 times more volatile than BII Railway Transportation. It trades about -0.22 of its total potential returns per unit of risk. BII Railway Transportation is currently generating about 0.36 per unit of volatility. If you would invest  2.65  in BII Railway Transportation on October 8, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.55% return on investment over 90 days.

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

INTERSHOP Communications Aktie  vs.  BII Railway Transportation

INTERSHOP Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with INTERSHOP Communications and BII Railway

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

The idea behind INTERSHOP Communications Aktiengesellschaft and BII Railway Transportation 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.