Correlation Between Beijing Venustech and Tibet Huayu

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

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

Diversification Opportunities for Beijing Venustech and Tibet Huayu

0.81

Correlation Coefficient

Beijing Venustech  Tibet Huayu

Very poor diversification

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

Pair Corralation between Beijing Venustech and Tibet Huayu

Assuming the 90 days trading horizon Beijing Venustech is expected to generate 1.14 times less return on investment than Tibet Huayu. But when comparing it to its historical volatility, Beijing Venustech is 1.08 times less risky than Tibet Huayu. It trades about 0.16 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Tibet Huayu Mining on September 17, 2024 and sell it today you would earn a total of  431.00  from holding Tibet Huayu Mining or generate 42.05% return on investment over 90 days.

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

Beijing Venustech  vs.  Tibet Huayu Mining

Beijing Venustech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Venustech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Venustech sustained solid returns over the last few months and may actually be approaching a breakup point.

Tibet Huayu Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Venustech and Tibet Huayu

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

The idea behind Beijing Venustech and Tibet Huayu Mining 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.