Correlation Between Beijing Kaiwen and Hubei Xingfa

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Can any of the company-specific risk be diversified away by investing in both Beijing Kaiwen and Hubei Xingfa 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 Hubei Xingfa 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 Hubei Xingfa Chemicals, you can compare the effects of market volatilities on Beijing Kaiwen and Hubei Xingfa 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 Hubei Xingfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kaiwen and Hubei Xingfa.

Diversification Opportunities for Beijing Kaiwen and Hubei Xingfa

BeijingHubeiDiversified AwayBeijingHubeiDiversified Away100%
0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Beijing and Hubei is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kaiwen Education and Hubei Xingfa Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Xingfa Chemicals 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 Hubei Xingfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Xingfa Chemicals has no effect on the direction of Beijing Kaiwen i.e., Beijing Kaiwen and Hubei Xingfa go up and down completely randomly.

Pair Corralation between Beijing Kaiwen and Hubei Xingfa

Assuming the 90 days trading horizon Beijing Kaiwen Education is expected to under-perform the Hubei Xingfa. In addition to that, Beijing Kaiwen is 2.04 times more volatile than Hubei Xingfa Chemicals. It trades about -0.02 of its total potential returns per unit of risk. Hubei Xingfa Chemicals is currently generating about 0.0 per unit of volatility. If you would invest  2,221  in Hubei Xingfa Chemicals on October 21, 2024 and sell it today you would lose (18.00) from holding Hubei Xingfa Chemicals or give up 0.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Beijing Kaiwen Education  vs.  Hubei Xingfa Chemicals

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -100102030
JavaScript chart by amCharts 3.21.15002659 600141
       Timeline  
Beijing Kaiwen Education 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan44.555.56
Hubei Xingfa Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hubei Xingfa Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Xingfa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan212223242526

Beijing Kaiwen and Hubei Xingfa Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.78-9.57-6.36-3.160.03.176.399.6112.83 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.15002659 600141
       Returns  

Pair Trading with Beijing Kaiwen and Hubei Xingfa

The main advantage of trading using opposite Beijing Kaiwen and Hubei Xingfa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Kaiwen position performs unexpectedly, Hubei Xingfa 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 Hubei Xingfa will offset losses from the drop in Hubei Xingfa's long position.
The idea behind Beijing Kaiwen Education and Hubei Xingfa Chemicals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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