Correlation Between Zhongshan Broad and Beijing Baolande

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

By analyzing existing cross correlation between Zhongshan Broad Ocean Motor and Beijing Baolande Software, you can compare the effects of market volatilities on Zhongshan Broad and Beijing Baolande 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 Zhongshan Broad with a short position of Beijing Baolande. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad and Beijing Baolande.

Diversification Opportunities for Zhongshan Broad and Beijing Baolande

0.36

Correlation Coefficient

Zhongshan Broad  Beijing Baolande

Weak diversification

The 3 months correlation between Zhongshan and Beijing is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Beijing Baolande Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Baolande Software and Zhongshan Broad 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 Zhongshan Broad Ocean Motor are associated (or correlated) with Beijing Baolande. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Baolande Software has no effect on the direction of Zhongshan Broad i.e., Zhongshan Broad and Beijing Baolande go up and down completely randomly.

Pair Corralation between Zhongshan Broad and Beijing Baolande

Assuming the 90 days trading horizon Zhongshan Broad Ocean Motor is expected to generate 0.47 times more return on investment than Beijing Baolande. However, Zhongshan Broad Ocean Motor is 2.13 times less risky than Beijing Baolande. It trades about 0.06 of its potential returns per unit of risk. Beijing Baolande Software is currently generating about 0.02 per unit of risk. If you would invest  534.00  in Zhongshan Broad Ocean Motor on October 22, 2024 and sell it today you would earn a total of  37.00  from holding Zhongshan Broad Ocean Motor or generate 6.93% return on investment over 90 days.

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

Zhongshan Broad Ocean Motor  vs.  Beijing Baolande Software

Zhongshan Broad Ocean

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Beijing Baolande Software

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Baolande Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Baolande may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zhongshan Broad and Beijing Baolande

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

The idea behind Zhongshan Broad Ocean Motor and Beijing Baolande Software 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.