Correlation Between Beijing HuaYuanYiTong and Beijing Jiaman

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

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

Diversification Opportunities for Beijing HuaYuanYiTong and Beijing Jiaman

0.84

Correlation Coefficient

Beijing HuaYuanYiTong  Beijing Jiaman

Very poor diversification

The 3 months correlation between Beijing and Beijing is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Beijing HuaYuanYiTong Thermal and Beijing Jiaman Dress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Jiaman Dress and Beijing HuaYuanYiTong 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 HuaYuanYiTong Thermal are associated (or correlated) with Beijing Jiaman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Jiaman Dress has no effect on the direction of Beijing HuaYuanYiTong i.e., Beijing HuaYuanYiTong and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Beijing HuaYuanYiTong and Beijing Jiaman

Assuming the 90 days trading horizon Beijing HuaYuanYiTong Thermal is expected to generate 1.18 times more return on investment than Beijing Jiaman. However, Beijing HuaYuanYiTong is 1.18 times more volatile than Beijing Jiaman Dress. It trades about 0.19 of its potential returns per unit of risk. Beijing Jiaman Dress is currently generating about 0.13 per unit of risk. If you would invest  808.00  in Beijing HuaYuanYiTong Thermal on September 4, 2024 and sell it today you would earn a total of  363.00  from holding Beijing HuaYuanYiTong Thermal or generate 44.93% return on investment over 90 days.

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

Beijing HuaYuanYiTong Thermal  vs.  Beijing Jiaman Dress

Beijing HuaYuanYiTong

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing HuaYuanYiTong Thermal are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing HuaYuanYiTong sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Jiaman Dress

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Jiaman Dress are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Jiaman sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing HuaYuanYiTong and Beijing Jiaman

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

The idea behind Beijing HuaYuanYiTong Thermal and Beijing Jiaman Dress 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.