Correlation Between Beijing Mainstreets and Tibet Huayu

Can any of the company-specific risk be diversified away by investing in both Beijing Mainstreets and Tibet Huayu 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 Tibet Huayu 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 Tibet Huayu Mining, you can compare the effects of market volatilities on Beijing Mainstreets and Tibet Huayu 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 Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Mainstreets and Tibet Huayu.

Diversification Opportunities for Beijing Mainstreets and Tibet Huayu

0.63

Correlation Coefficient

Beijing Mainstreets  Tibet Huayu

Poor diversification

The 3 months correlation between Beijing and Tibet is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Mainstreets Investment and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining 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 Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Beijing Mainstreets i.e., Beijing Mainstreets and Tibet Huayu go up and down completely randomly.

Pair Corralation between Beijing Mainstreets and Tibet Huayu

Assuming the 90 days trading horizon Beijing Mainstreets Investment is expected to generate 2.12 times more return on investment than Tibet Huayu. However, Beijing Mainstreets is 2.12 times more volatile than Tibet Huayu Mining. It trades about -0.07 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about -0.52 per unit of risk. If you would invest  252.00  in Beijing Mainstreets Investment on October 10, 2024 and sell it today you would lose (17.00) from holding Beijing Mainstreets Investment or give up 6.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Beijing Mainstreets Investment  vs.  Tibet Huayu Mining

Beijing Mainstreets

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Mainstreets Investment are ranked lower than 9 (%) 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.

Tibet Huayu Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tibet Huayu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beijing Mainstreets and Tibet Huayu

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

The idea behind Beijing Mainstreets Investment and Tibet Huayu Mining 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.