Correlation Between Beijing Yanjing and Shengyuan Environmental

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

Diversification Opportunities for Beijing Yanjing and Shengyuan Environmental

0.32

Correlation Coefficient

Beijing Yanjing  Shengyuan Environmental

Weak diversification

The 3 months correlation between Beijing and Shengyuan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Shengyuan Environmental Protec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengyuan Environmental 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 Shengyuan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengyuan Environmental has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Shengyuan Environmental go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Shengyuan Environmental

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 1.12 times more return on investment than Shengyuan Environmental. However, Beijing Yanjing is 1.12 times more volatile than Shengyuan Environmental Protection. It trades about 0.05 of its potential returns per unit of risk. Shengyuan Environmental Protection is currently generating about 0.01 per unit of risk. If you would invest  1,166  in Beijing Yanjing Brewery on December 27, 2024 and sell it today you would earn a total of  42.00  from holding Beijing Yanjing Brewery or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Beijing Yanjing Brewery  vs.  Shengyuan Environmental Protec

Beijing Yanjing Brewery

Risk-Adjusted Performance

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.

Shengyuan Environmental

Risk-Adjusted Performance

Weak

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

Pair Trading with Beijing Yanjing and Shengyuan Environmental

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

The idea behind Beijing Yanjing Brewery and Shengyuan Environmental Protection 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.