Correlation Between Beijing Mainstreets and Chongqing Rural
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By analyzing existing cross correlation between Beijing Mainstreets Investment and Chongqing Rural Commercial, you can compare the effects of market volatilities on Beijing Mainstreets and Chongqing Rural 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 Chongqing Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Mainstreets and Chongqing Rural.
Diversification Opportunities for Beijing Mainstreets and Chongqing Rural
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beijing and Chongqing is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Mainstreets Investment and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Beijing Mainstreets i.e., Beijing Mainstreets and Chongqing Rural go up and down completely randomly.
Pair Corralation between Beijing Mainstreets and Chongqing Rural
Assuming the 90 days trading horizon Beijing Mainstreets Investment is expected to generate 1.52 times more return on investment than Chongqing Rural. However, Beijing Mainstreets is 1.52 times more volatile than Chongqing Rural Commercial. It trades about 0.09 of its potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.06 per unit of risk. If you would invest 205.00 in Beijing Mainstreets Investment on October 6, 2024 and sell it today you would earn a total of 39.00 from holding Beijing Mainstreets Investment or generate 19.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.44% |
Values | Daily Returns |
Beijing Mainstreets Investment vs. Chongqing Rural Commercial
Performance |
Timeline |
Beijing Mainstreets |
Chongqing Rural Comm |
Beijing Mainstreets and Chongqing Rural Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Beijing Mainstreets and Chongqing Rural
The main advantage of trading using opposite Beijing Mainstreets and Chongqing Rural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Mainstreets position performs unexpectedly, Chongqing Rural 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 Chongqing Rural will offset losses from the drop in Chongqing Rural's long position.The idea behind Beijing Mainstreets Investment and Chongqing Rural Commercial 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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