Correlation Between Guangzhou Jinyi and Beijing Enlight

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

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

Diversification Opportunities for Guangzhou Jinyi and Beijing Enlight

0.08

Correlation Coefficient

Guangzhou Jinyi  Beijing Enlight

Significant diversification

The 3 months correlation between Guangzhou and Beijing is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jinyi Media and Beijing Enlight Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enlight Media and Guangzhou Jinyi 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 Guangzhou Jinyi Media are associated (or correlated) with Beijing Enlight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enlight Media has no effect on the direction of Guangzhou Jinyi i.e., Guangzhou Jinyi and Beijing Enlight go up and down completely randomly.

Pair Corralation between Guangzhou Jinyi and Beijing Enlight

Assuming the 90 days trading horizon Guangzhou Jinyi is expected to generate 75.72 times less return on investment than Beijing Enlight. But when comparing it to its historical volatility, Guangzhou Jinyi Media is 1.54 times less risky than Beijing Enlight. It trades about 0.0 of its potential returns per unit of risk. Beijing Enlight Media is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  957.00  in Beijing Enlight Media on December 27, 2024 and sell it today you would earn a total of  1,184  from holding Beijing Enlight Media or generate 123.72% return on investment over 90 days.

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

Guangzhou Jinyi Media  vs.  Beijing Enlight Media

Guangzhou Jinyi Media

Risk-Adjusted Performance

Very Weak

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

Beijing Enlight Media

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enlight Media are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Enlight sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Jinyi and Beijing Enlight

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

The idea behind Guangzhou Jinyi Media and Beijing Enlight Media 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.