Correlation Between Sichuan Jinshi and Beijing Enlight

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

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

Diversification Opportunities for Sichuan Jinshi and Beijing Enlight

0.63

Correlation Coefficient

Sichuan Jinshi  Beijing Enlight

Poor diversification

The 3 months correlation between Sichuan and Beijing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology 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 Sichuan Jinshi 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 Sichuan Jinshi Technology 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 Sichuan Jinshi i.e., Sichuan Jinshi and Beijing Enlight go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Beijing Enlight

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to under-perform the Beijing Enlight. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Jinshi Technology is 1.18 times less risky than Beijing Enlight. The stock trades about 0.0 of its potential returns per unit of risk. The Beijing Enlight Media is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  918.00  in Beijing Enlight Media on October 11, 2024 and sell it today you would lose (43.00) from holding Beijing Enlight Media or give up 4.68% of portfolio value over 90 days.

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

Sichuan Jinshi Technology  vs.  Beijing Enlight Media

Sichuan Jinshi Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Enlight Media

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enlight Media are ranked lower than 6 (%) 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 Sichuan Jinshi and Beijing Enlight

The main advantage of trading using opposite Sichuan Jinshi and Beijing Enlight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Jinshi 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 Sichuan Jinshi Technology 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.