Correlation Between TRAVEL + and BII Railway

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and BII Railway Transportation, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and BII Railway.

Diversification Opportunities for TRAVEL + and BII Railway

-0.6

Correlation Coefficient

TRAVEL +  BII Railway

Excellent diversification

The 3 months correlation between TRAVEL and BII is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 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 TRAVEL + 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 TRAVEL LEISURE DL 01 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 TRAVEL + i.e., TRAVEL + and BII Railway go up and down completely randomly.

Pair Corralation between TRAVEL + and BII Railway

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to under-perform the BII Railway. But the stock apears to be less risky and, when comparing its historical volatility, TRAVEL LEISURE DL 01 is 1.41 times less risky than BII Railway. The stock trades about -0.39 of its potential returns per unit of risk. The BII Railway Transportation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2.60  in BII Railway Transportation on October 5, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  BII Railway Transportation

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TRAVEL + and BII Railway

The main advantage of trading using opposite TRAVEL + and BII Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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 TRAVEL LEISURE DL 01 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.