Correlation Between Beijing Yanjing and Jiangsu Yanghe

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

By analyzing existing cross correlation between Beijing Yanjing Brewery and Jiangsu Yanghe Brewery, you can compare the effects of market volatilities on Beijing Yanjing and Jiangsu Yanghe 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 Yanjing with a short position of Jiangsu Yanghe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Yanjing and Jiangsu Yanghe.

Diversification Opportunities for Beijing Yanjing and Jiangsu Yanghe

0.91

Correlation Coefficient

Beijing Yanjing  Jiangsu Yanghe

Almost no diversification

The 3 months correlation between Beijing and Jiangsu is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Jiangsu Yanghe Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yanghe Brewery and Beijing Yanjing 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 Yanjing Brewery are associated (or correlated) with Jiangsu Yanghe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yanghe Brewery has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Jiangsu Yanghe go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Jiangsu Yanghe

Assuming the 90 days trading horizon Beijing Yanjing is expected to generate 1.45 times less return on investment than Jiangsu Yanghe. But when comparing it to its historical volatility, Beijing Yanjing Brewery is 1.21 times less risky than Jiangsu Yanghe. It trades about 0.09 of its potential returns per unit of risk. Jiangsu Yanghe Brewery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,300  in Jiangsu Yanghe Brewery on September 12, 2024 and sell it today you would earn a total of  1,264  from holding Jiangsu Yanghe Brewery or generate 17.32% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  Jiangsu Yanghe Brewery

Beijing Yanjing Brewery

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Yanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yanghe Brewery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yanghe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Yanjing and Jiangsu Yanghe

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

The idea behind Beijing Yanjing Brewery and Jiangsu Yanghe Brewery 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.