Correlation Between Beijing Yanjing and Zhejiang Construction

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

Diversification Opportunities for Beijing Yanjing and Zhejiang Construction

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Beijing and Zhejiang is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction 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 Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Zhejiang Construction go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Zhejiang Construction

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 0.64 times more return on investment than Zhejiang Construction. However, Beijing Yanjing Brewery is 1.56 times less risky than Zhejiang Construction. It trades about 0.12 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about 0.05 per unit of risk. If you would invest  873.00  in Beijing Yanjing Brewery on September 29, 2024 and sell it today you would earn a total of  293.00  from holding Beijing Yanjing Brewery or generate 33.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.19%
ValuesDaily Returns

Beijing Yanjing Brewery  vs.  Zhejiang Construction Investme

 Performance 
       Timeline  
Beijing Yanjing Brewery 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Yanjing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Zhejiang Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zhejiang Construction Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Yanjing and Zhejiang Construction Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing Yanjing and Zhejiang Construction

The main advantage of trading using opposite Beijing Yanjing and Zhejiang Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Yanjing position performs unexpectedly, Zhejiang Construction 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 Zhejiang Construction will offset losses from the drop in Zhejiang Construction's long position.
The idea behind Beijing Yanjing Brewery and Zhejiang Construction Investment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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