Correlation Between Beijing Yanjing and Postal Savings

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

Diversification Opportunities for Beijing Yanjing and Postal Savings

0.83

Correlation Coefficient

Beijing Yanjing  Postal Savings

Very poor diversification

The 3 months correlation between Beijing and Postal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Postal Savings go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Postal Savings

Assuming the 90 days trading horizon Beijing Yanjing is expected to generate 2.03 times less return on investment than Postal Savings. In addition to that, Beijing Yanjing is 1.29 times more volatile than Postal Savings Bank. It trades about 0.06 of its total potential returns per unit of risk. Postal Savings Bank is currently generating about 0.16 per unit of volatility. If you would invest  462.00  in Postal Savings Bank on September 5, 2024 and sell it today you would earn a total of  86.00  from holding Postal Savings Bank or generate 18.61% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  Postal Savings Bank

Beijing Yanjing Brewery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Yanjing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Postal Savings Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Postal Savings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Yanjing and Postal Savings

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

The idea behind Beijing Yanjing Brewery and Postal Savings Bank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.