Correlation Between Beijing Yanjing and Jinhui Liquor

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

Diversification Opportunities for Beijing Yanjing and Jinhui Liquor

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Beijing and Jinhui is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor 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 Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Jinhui Liquor go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Jinhui Liquor

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 0.88 times more return on investment than Jinhui Liquor. However, Beijing Yanjing Brewery is 1.14 times less risky than Jinhui Liquor. It trades about 0.02 of its potential returns per unit of risk. Jinhui Liquor Co is currently generating about -0.02 per unit of risk. If you would invest  1,066  in Beijing Yanjing Brewery on October 11, 2024 and sell it today you would earn a total of  97.00  from holding Beijing Yanjing Brewery or generate 9.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Beijing Yanjing Brewery  vs.  Jinhui Liquor Co

 Performance 
       Timeline  
Beijing Yanjing Brewery 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 7 (%) 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.
Jinhui Liquor 

Risk-Adjusted Performance

0 of 100

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

Beijing Yanjing and Jinhui Liquor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing Yanjing and Jinhui Liquor

The main advantage of trading using opposite Beijing Yanjing and Jinhui Liquor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Yanjing position performs unexpectedly, Jinhui Liquor 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 Jinhui Liquor will offset losses from the drop in Jinhui Liquor's long position.
The idea behind Beijing Yanjing Brewery and Jinhui Liquor Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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