Correlation Between Champion Building and Buima

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

By analyzing existing cross correlation between Champion Building Materials and Buima Group, you can compare the effects of market volatilities on Champion Building and Buima 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 Champion Building with a short position of Buima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Buima.

Diversification Opportunities for Champion Building and Buima

-0.65

Correlation Coefficient

Champion Building  Buima

Excellent diversification

The 3 months correlation between Champion and Buima is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building Materials and Buima Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buima Group and Champion Building 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 Champion Building Materials are associated (or correlated) with Buima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buima Group has no effect on the direction of Champion Building i.e., Champion Building and Buima go up and down completely randomly.

Pair Corralation between Champion Building and Buima

Assuming the 90 days trading horizon Champion Building Materials is expected to generate 1.98 times more return on investment than Buima. However, Champion Building is 1.98 times more volatile than Buima Group. It trades about 0.31 of its potential returns per unit of risk. Buima Group is currently generating about 0.21 per unit of risk. If you would invest  961.00  in Champion Building Materials on February 6, 2024 and sell it today you would earn a total of  164.00  from holding Champion Building Materials or generate 17.07% return on investment over 90 days.

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

Champion Building Materials  vs.  Buima Group

Champion Building

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Building Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Champion Building may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Buima Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buima Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Buima showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Champion Building and Buima

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

The idea behind Champion Building Materials and Buima Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.