Correlation Between Beijing Yanjing and GigaDevice SemiconductorBei

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

Diversification Opportunities for Beijing Yanjing and GigaDevice SemiconductorBei

0.79

Correlation Coefficient

Beijing Yanjing  GigaDevice SemiconductorBei

Poor diversification

The 3 months correlation between Beijing and GigaDevice is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and GigaDevice SemiconductorBeiji in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaDevice SemiconductorBei 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 GigaDevice SemiconductorBei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaDevice SemiconductorBei has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and GigaDevice SemiconductorBei go up and down completely randomly.

Pair Corralation between Beijing Yanjing and GigaDevice SemiconductorBei

Assuming the 90 days trading horizon Beijing Yanjing is expected to generate 5.95 times less return on investment than GigaDevice SemiconductorBei. But when comparing it to its historical volatility, Beijing Yanjing Brewery is 1.93 times less risky than GigaDevice SemiconductorBei. It trades about 0.04 of its potential returns per unit of risk. GigaDevice SemiconductorBeiji is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,837  in GigaDevice SemiconductorBeiji on September 30, 2024 and sell it today you would earn a total of  2,359  from holding GigaDevice SemiconductorBeiji or generate 26.69% 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.  GigaDevice SemiconductorBeiji

Beijing Yanjing Brewery

Risk-Adjusted Performance

3 of 100

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.

GigaDevice SemiconductorBei

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Yanjing and GigaDevice SemiconductorBei

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

The idea behind Beijing Yanjing Brewery and GigaDevice SemiconductorBeiji 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.