Correlation Between Beijing Mainstreets and Panda Financial

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Can any of the company-specific risk be diversified away by investing in both Beijing Mainstreets and Panda Financial 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 Beijing Mainstreets and Panda Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beijing Mainstreets Investment and Panda Financial Holding, you can compare the effects of market volatilities on Beijing Mainstreets and Panda Financial 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 Beijing Mainstreets with a short position of Panda Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Mainstreets and Panda Financial.

Diversification Opportunities for Beijing Mainstreets and Panda Financial

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Beijing and Panda is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Mainstreets Investment and Panda Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Financial Holding and Beijing Mainstreets 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 Beijing Mainstreets Investment are associated (or correlated) with Panda Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Financial Holding has no effect on the direction of Beijing Mainstreets i.e., Beijing Mainstreets and Panda Financial go up and down completely randomly.

Pair Corralation between Beijing Mainstreets and Panda Financial

Assuming the 90 days trading horizon Beijing Mainstreets Investment is expected to under-perform the Panda Financial. In addition to that, Beijing Mainstreets is 1.4 times more volatile than Panda Financial Holding. It trades about -0.04 of its total potential returns per unit of risk. Panda Financial Holding is currently generating about 0.0 per unit of volatility. If you would invest  1,501  in Panda Financial Holding on September 30, 2024 and sell it today you would lose (244.00) from holding Panda Financial Holding or give up 16.26% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Beijing Mainstreets Investment  vs.  Panda Financial Holding

 Performance 
       Timeline  
Beijing Mainstreets 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Mainstreets Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Mainstreets sustained solid returns over the last few months and may actually be approaching a breakup point.
Panda Financial Holding 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beijing Mainstreets and Panda Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing Mainstreets and Panda Financial

The main advantage of trading using opposite Beijing Mainstreets and Panda Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Mainstreets position performs unexpectedly, Panda Financial 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 Panda Financial will offset losses from the drop in Panda Financial's long position.
The idea behind Beijing Mainstreets Investment and Panda Financial Holding 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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