Correlation Between Hengli Industrial and Beijing Shunxin

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

By analyzing existing cross correlation between Hengli Industrial Development and Beijing Shunxin Agriculture, you can compare the effects of market volatilities on Hengli Industrial and Beijing Shunxin 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 Hengli Industrial with a short position of Beijing Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengli Industrial and Beijing Shunxin.

Diversification Opportunities for Hengli Industrial and Beijing Shunxin

-0.41

Correlation Coefficient

Hengli Industrial  Beijing Shunxin

Very good diversification

The 3 months correlation between Hengli and Beijing is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hengli Industrial Development and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri and Hengli Industrial 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 Hengli Industrial Development are associated (or correlated) with Beijing Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Hengli Industrial i.e., Hengli Industrial and Beijing Shunxin go up and down completely randomly.

Pair Corralation between Hengli Industrial and Beijing Shunxin

Assuming the 90 days trading horizon Hengli Industrial Development is expected to generate 2.01 times more return on investment than Beijing Shunxin. However, Hengli Industrial is 2.01 times more volatile than Beijing Shunxin Agriculture. It trades about 0.21 of its potential returns per unit of risk. Beijing Shunxin Agriculture is currently generating about -0.1 per unit of risk. If you would invest  198.00  in Hengli Industrial Development on December 26, 2024 and sell it today you would earn a total of  89.00  from holding Hengli Industrial Development or generate 44.95% return on investment over 90 days.

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

Hengli Industrial Development  vs.  Beijing Shunxin Agriculture

Hengli Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Shunxin Agri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Shunxin Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hengli Industrial and Beijing Shunxin

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

The idea behind Hengli Industrial Development and Beijing Shunxin Agriculture 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.