Correlation Between Beijing Yanjing and Beijing Shanghai

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

Diversification Opportunities for Beijing Yanjing and Beijing Shanghai

0.66

Correlation Coefficient

Beijing Yanjing  Beijing Shanghai

Poor diversification

The 3 months correlation between Beijing and Beijing is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Beijing Shanghai High Speed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shanghai High 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 Beijing Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shanghai High has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Beijing Shanghai go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Beijing Shanghai

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 1.24 times more return on investment than Beijing Shanghai. However, Beijing Yanjing is 1.24 times more volatile than Beijing Shanghai High Speed. It trades about 0.43 of its potential returns per unit of risk. Beijing Shanghai High Speed is currently generating about -0.02 per unit of risk. If you would invest  1,037  in Beijing Yanjing Brewery on October 4, 2024 and sell it today you would earn a total of  167.00  from holding Beijing Yanjing Brewery or generate 16.1% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  Beijing Shanghai High Speed

Beijing Yanjing Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 6 (%) 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 February 2025.

Beijing Shanghai High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Shanghai High Speed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Shanghai 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 Beijing Shanghai

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

The idea behind Beijing Yanjing Brewery and Beijing Shanghai High Speed 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..