Correlation Between Weichai Heavy and Beijing Bashi

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

By analyzing existing cross correlation between Weichai Heavy Machinery and Beijing Bashi Media, you can compare the effects of market volatilities on Weichai Heavy and Beijing Bashi 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 Weichai Heavy with a short position of Beijing Bashi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Heavy and Beijing Bashi.

Diversification Opportunities for Weichai Heavy and Beijing Bashi

0.0

Correlation Coefficient

Weichai Heavy  Beijing Bashi

Pay attention - limited upside

The 3 months correlation between Weichai and Beijing is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Heavy Machinery and Beijing Bashi Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Bashi Media and Weichai Heavy 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 Weichai Heavy Machinery are associated (or correlated) with Beijing Bashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Bashi Media has no effect on the direction of Weichai Heavy i.e., Weichai Heavy and Beijing Bashi go up and down completely randomly.

Pair Corralation between Weichai Heavy and Beijing Bashi

If you would invest  1,039  in Weichai Heavy Machinery on October 23, 2024 and sell it today you would earn a total of  1,011  from holding Weichai Heavy Machinery or generate 97.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Weichai Heavy Machinery  vs.  Beijing Bashi Media

Weichai Heavy Machinery

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Weichai Heavy Machinery are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weichai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Bashi Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Weichai Heavy and Beijing Bashi

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

The idea behind Weichai Heavy Machinery and Beijing Bashi Media 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.