Correlation Between Guangdong Qunxing and Beijing Wandong

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

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

Diversification Opportunities for Guangdong Qunxing and Beijing Wandong

0.63

Correlation Coefficient

Guangdong Qunxing  Beijing Wandong

Poor diversification

The 3 months correlation between Guangdong and Beijing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Qunxing Toys 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 Guangdong Qunxing 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 Guangdong Qunxing Toys 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 Guangdong Qunxing i.e., Guangdong Qunxing and Beijing Wandong go up and down completely randomly.

Pair Corralation between Guangdong Qunxing and Beijing Wandong

Assuming the 90 days trading horizon Guangdong Qunxing Toys is expected to generate 1.42 times more return on investment than Beijing Wandong. However, Guangdong Qunxing is 1.42 times more volatile than Beijing Wandong Medical. It trades about 0.03 of its potential returns per unit of risk. Beijing Wandong Medical is currently generating about -0.02 per unit of risk. If you would invest  627.00  in Guangdong Qunxing Toys on October 4, 2024 and sell it today you would earn a total of  197.00  from holding Guangdong Qunxing Toys or generate 31.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Guangdong Qunxing Toys  vs.  Beijing Wandong Medical

Guangdong Qunxing Toys

Risk-Adjusted Performance

13 of 100

Good

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

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 Guangdong Qunxing and Beijing Wandong

The main advantage of trading using opposite Guangdong Qunxing and Beijing Wandong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Qunxing 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 Guangdong Qunxing Toys 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.

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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.