Correlation Between Bin Chuan and Top Union

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

By analyzing existing cross correlation between Bin Chuan Enterprise and Top Union Electronics, you can compare the effects of market volatilities on Bin Chuan and Top Union 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 Bin Chuan with a short position of Top Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bin Chuan and Top Union.

Diversification Opportunities for Bin Chuan and Top Union

0.58

Correlation Coefficient

Bin Chuan  Top Union

Very weak diversification

The 3 months correlation between Bin and Top is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bin Chuan Enterprise and Top Union Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Union Electronics and Bin Chuan 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 Bin Chuan Enterprise are associated (or correlated) with Top Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Union Electronics has no effect on the direction of Bin Chuan i.e., Bin Chuan and Top Union go up and down completely randomly.

Pair Corralation between Bin Chuan and Top Union

Assuming the 90 days trading horizon Bin Chuan Enterprise is expected to generate 7.38 times more return on investment than Top Union. However, Bin Chuan is 7.38 times more volatile than Top Union Electronics. It trades about 0.37 of its potential returns per unit of risk. Top Union Electronics is currently generating about 0.67 per unit of risk. If you would invest  5,550  in Bin Chuan Enterprise on December 5, 2024 and sell it today you would earn a total of  2,850  from holding Bin Chuan Enterprise or generate 51.35% return on investment over 90 days.

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

Bin Chuan Enterprise  vs.  Top Union Electronics

Bin Chuan Enterprise

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bin Chuan Enterprise are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bin Chuan showed solid returns over the last few months and may actually be approaching a breakup point.

Top Union Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Top Union Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Top Union is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bin Chuan and Top Union

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

The idea behind Bin Chuan Enterprise and Top Union Electronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.