Correlation Between Beijing Shunxin and Kangping Technology

Can any of the company-specific risk be diversified away by investing in both Beijing Shunxin and Kangping 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 Shunxin and Kangping Technology 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 Kangping Technology Co, you can compare the effects of market volatilities on Beijing Shunxin and Kangping 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 Shunxin with a short position of Kangping Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Shunxin and Kangping Technology.

Diversification Opportunities for Beijing Shunxin and Kangping Technology

0.56

Correlation Coefficient

Beijing Shunxin  Kangping Technology

Very weak diversification

The 3 months correlation between Beijing and Kangping is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Shunxin Agriculture and Kangping Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangping Technology 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 Kangping Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangping Technology has no effect on the direction of Beijing Shunxin i.e., Beijing Shunxin and Kangping Technology go up and down completely randomly.

Pair Corralation between Beijing Shunxin and Kangping Technology

Assuming the 90 days trading horizon Beijing Shunxin Agriculture is expected to under-perform the Kangping Technology. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Shunxin Agriculture is 1.18 times less risky than Kangping Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Kangping Technology Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,271  in Kangping Technology Co on October 25, 2024 and sell it today you would lose (51.00) from holding Kangping Technology Co or give up 2.25% of portfolio value over 90 days.

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

Beijing Shunxin Agriculture  vs.  Kangping Technology Co

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 somewhat strong basic indicators, Beijing Shunxin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kangping Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kangping Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kangping Technology 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 Shunxin and Kangping Technology

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

The idea behind Beijing Shunxin Agriculture and Kangping Technology 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.