Correlation Between Blue Sail and Beijing Wandong

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

By analyzing existing cross correlation between Blue Sail Medical and Beijing Wandong Medical, you can compare the effects of market volatilities on Blue Sail and Beijing Wandong 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 Blue Sail with a short position of Beijing Wandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and Beijing Wandong.

Diversification Opportunities for Blue Sail and Beijing Wandong

0.81

Correlation Coefficient

Blue Sail  Beijing Wandong

Very poor diversification

The 3 months correlation between Blue and Beijing is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong Medical and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of Blue Sail i.e., Blue Sail and Beijing Wandong go up and down completely randomly.

Pair Corralation between Blue Sail and Beijing Wandong

Assuming the 90 days trading horizon Blue Sail Medical is expected to under-perform the Beijing Wandong. But the stock apears to be less risky and, when comparing its historical volatility, Blue Sail Medical is 1.16 times less risky than Beijing Wandong. The stock trades about -0.03 of its potential returns per unit of risk. The Beijing Wandong Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,010  in Beijing Wandong Medical on October 4, 2024 and sell it today you would lose (500.00) from holding Beijing Wandong Medical or give up 24.88% of portfolio value over 90 days.

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

Blue Sail Medical  vs.  Beijing Wandong Medical

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Sail Medical 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.

Beijing Wandong Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blue Sail and Beijing Wandong

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

The idea behind Blue Sail Medical and Beijing Wandong Medical 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.