Correlation Between BII Railway and CSL

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

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

Diversification Opportunities for BII Railway and CSL

-0.16

Correlation Coefficient

BII Railway  CSL

Good diversification

The 3 months correlation between BII and CSL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and BII Railway 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 BII Railway Transportation are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of BII Railway i.e., BII Railway and CSL go up and down completely randomly.

Pair Corralation between BII Railway and CSL

Assuming the 90 days horizon BII Railway Transportation is expected to generate 1.23 times more return on investment than CSL. However, BII Railway is 1.23 times more volatile than CSL Limited. It trades about 0.1 of its potential returns per unit of risk. CSL Limited is currently generating about 0.07 per unit of risk. If you would invest  2.46  in BII Railway Transportation on April 23, 2025 and sell it today you would earn a total of  0.29  from holding BII Railway Transportation or generate 11.79% return on investment over 90 days.

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

BII Railway Transportation  vs.  CSL Limited

BII Railway Transpor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CSL Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BII Railway and CSL

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

The idea behind BII Railway Transportation and CSL Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.