Correlation Between Ningxia Younglight and Beijing Kingsoft

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

Diversification Opportunities for Ningxia Younglight and Beijing Kingsoft

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ningxia and Beijing is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Beijing Kingsoft Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kingsoft Office and Ningxia Younglight 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 Ningxia Younglight Chemicals are associated (or correlated) with Beijing Kingsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kingsoft Office has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Beijing Kingsoft go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Beijing Kingsoft

Assuming the 90 days trading horizon Ningxia Younglight is expected to generate 2.13 times less return on investment than Beijing Kingsoft. But when comparing it to its historical volatility, Ningxia Younglight Chemicals is 1.09 times less risky than Beijing Kingsoft. It trades about 0.09 of its potential returns per unit of risk. Beijing Kingsoft Office is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  27,899  in Beijing Kingsoft Office on September 20, 2024 and sell it today you would earn a total of  3,499  from holding Beijing Kingsoft Office or generate 12.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ningxia Younglight Chemicals  vs.  Beijing Kingsoft Office

 Performance 
       Timeline  
Ningxia Younglight 

Risk-Adjusted Performance

16 of 100

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

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kingsoft Office are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kingsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningxia Younglight and Beijing Kingsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ningxia Younglight and Beijing Kingsoft

The main advantage of trading using opposite Ningxia Younglight and Beijing Kingsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningxia Younglight position performs unexpectedly, Beijing Kingsoft 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 Kingsoft will offset losses from the drop in Beijing Kingsoft's long position.
The idea behind Ningxia Younglight Chemicals and Beijing Kingsoft Office 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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