Correlation Between Beijing Kaiwen and Inner Mongolia

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

Diversification Opportunities for Beijing Kaiwen and Inner Mongolia

-0.29

Correlation Coefficient

Beijing Kaiwen  Inner Mongolia

Very good diversification

The 3 months correlation between Beijing and Inner is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kaiwen Education and Inner Mongolia ERDOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia ERDOS 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia ERDOS has no effect on the direction of Beijing Kaiwen i.e., Beijing Kaiwen and Inner Mongolia go up and down completely randomly.

Pair Corralation between Beijing Kaiwen and Inner Mongolia

Assuming the 90 days trading horizon Beijing Kaiwen Education is expected to generate 1.55 times more return on investment than Inner Mongolia. However, Beijing Kaiwen is 1.55 times more volatile than Inner Mongolia ERDOS. It trades about 0.02 of its potential returns per unit of risk. Inner Mongolia ERDOS is currently generating about 0.01 per unit of risk. If you would invest  449.00  in Beijing Kaiwen Education on December 25, 2024 and sell it today you would earn a total of  8.00  from holding Beijing Kaiwen Education or generate 1.78% return on investment over 90 days.

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

Beijing Kaiwen Education  vs.  Inner Mongolia ERDOS

Beijing Kaiwen Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kaiwen Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Inner Mongolia ERDOS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Beijing Kaiwen and Inner Mongolia

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

The idea behind Beijing Kaiwen Education and Inner Mongolia ERDOS 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.