Correlation Between Beijing Yanjing and Loongson Technology

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

Diversification Opportunities for Beijing Yanjing and Loongson Technology

-0.16

Correlation Coefficient

Beijing Yanjing  Loongson Technology

Good diversification

The 3 months correlation between Beijing and Loongson is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp 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 Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Loongson Technology go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Loongson Technology

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 0.52 times more return on investment than Loongson Technology. However, Beijing Yanjing Brewery is 1.92 times less risky than Loongson Technology. It trades about 0.07 of its potential returns per unit of risk. Loongson Technology Corp is currently generating about -0.08 per unit of risk. If you would invest  1,138  in Beijing Yanjing Brewery on December 26, 2024 and sell it today you would earn a total of  70.00  from holding Beijing Yanjing Brewery or generate 6.15% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  Loongson Technology Corp

Beijing Yanjing Brewery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 5 (%) 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 April 2025.

Loongson Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loongson Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Beijing Yanjing and Loongson Technology

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

The idea behind Beijing Yanjing Brewery and Loongson Technology Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.