Correlation Between Beijing Yanjing and State Grid

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

Diversification Opportunities for Beijing Yanjing and State Grid

0.51

Correlation Coefficient

Beijing Yanjing  State Grid

Very weak diversification

The 3 months correlation between Beijing and State is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and State Grid go up and down completely randomly.

Pair Corralation between Beijing Yanjing and State Grid

Assuming the 90 days trading horizon Beijing Yanjing is expected to generate 1.46 times less return on investment than State Grid. But when comparing it to its historical volatility, Beijing Yanjing Brewery is 1.4 times less risky than State Grid. It trades about 0.13 of its potential returns per unit of risk. State Grid InformationCommunication is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,670  in State Grid InformationCommunication on September 13, 2024 and sell it today you would earn a total of  452.00  from holding State Grid InformationCommunication or generate 27.07% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  State Grid InformationCommunic

Beijing Yanjing Brewery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 10 (%) 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.

State Grid Informati

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Grid InformationCommunication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, State Grid sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Yanjing and State Grid

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

The idea behind Beijing Yanjing Brewery and State Grid InformationCommunication 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.