Correlation Between Beijing Kaiwen and Nanjing Putian

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

By analyzing existing cross correlation between Beijing Kaiwen Education and Nanjing Putian Telecommunications, you can compare the effects of market volatilities on Beijing Kaiwen and Nanjing Putian 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 Kaiwen with a short position of Nanjing Putian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kaiwen and Nanjing Putian.

Diversification Opportunities for Beijing Kaiwen and Nanjing Putian

0.66

Correlation Coefficient

Beijing Kaiwen  Nanjing Putian

Poor diversification

The 3 months correlation between Beijing and Nanjing is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kaiwen Education and Nanjing Putian Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Putian Telec and Beijing Kaiwen 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 Kaiwen Education are associated (or correlated) with Nanjing Putian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Putian Telec has no effect on the direction of Beijing Kaiwen i.e., Beijing Kaiwen and Nanjing Putian go up and down completely randomly.

Pair Corralation between Beijing Kaiwen and Nanjing Putian

Assuming the 90 days trading horizon Beijing Kaiwen Education is expected to generate 0.88 times more return on investment than Nanjing Putian. However, Beijing Kaiwen Education is 1.14 times less risky than Nanjing Putian. It trades about -0.01 of its potential returns per unit of risk. Nanjing Putian Telecommunications is currently generating about -0.04 per unit of risk. If you would invest  507.00  in Beijing Kaiwen Education on December 4, 2024 and sell it today you would lose (23.00) from holding Beijing Kaiwen Education or give up 4.54% of portfolio value over 90 days.

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

Beijing Kaiwen Education  vs.  Nanjing Putian Telecommunicati

Beijing Kaiwen Education

Risk-Adjusted Performance

Very Weak

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

Nanjing Putian Telec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nanjing Putian Telecommunications 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.

Pair Trading with Beijing Kaiwen and Nanjing Putian

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

The idea behind Beijing Kaiwen Education and Nanjing Putian Telecommunications 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.