Correlation Between Beijing Shunxin and Longmaster Information

Can any of the company-specific risk be diversified away by investing in both Beijing Shunxin and Longmaster Information 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 Shunxin and Longmaster Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing Shunxin Agriculture and Longmaster Information Tech, you can compare the effects of market volatilities on Beijing Shunxin and Longmaster Information 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 Shunxin with a short position of Longmaster Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Shunxin and Longmaster Information.

Diversification Opportunities for Beijing Shunxin and Longmaster Information

0.65

Correlation Coefficient

Beijing Shunxin  Longmaster Information

Poor diversification

The 3 months correlation between Beijing and Longmaster is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Shunxin Agriculture and Longmaster Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longmaster Information and Beijing Shunxin 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 Shunxin Agriculture are associated (or correlated) with Longmaster Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longmaster Information has no effect on the direction of Beijing Shunxin i.e., Beijing Shunxin and Longmaster Information go up and down completely randomly.

Pair Corralation between Beijing Shunxin and Longmaster Information

Assuming the 90 days trading horizon Beijing Shunxin Agriculture is expected to generate 0.7 times more return on investment than Longmaster Information. However, Beijing Shunxin Agriculture is 1.43 times less risky than Longmaster Information. It trades about -0.06 of its potential returns per unit of risk. Longmaster Information Tech is currently generating about -0.06 per unit of risk. If you would invest  2,070  in Beijing Shunxin Agriculture on October 7, 2024 and sell it today you would lose (251.00) from holding Beijing Shunxin Agriculture or give up 12.13% of portfolio value over 90 days.

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

Beijing Shunxin Agriculture  vs.  Longmaster Information Tech

Beijing Shunxin Agri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Shunxin Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Longmaster Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Longmaster Information Tech 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Beijing Shunxin and Longmaster Information

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

The idea behind Beijing Shunxin Agriculture and Longmaster Information Tech 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.