Correlation Between Beijing Ultrapower and Tibet Huayu

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

By analyzing existing cross correlation between Beijing Ultrapower Software and Tibet Huayu Mining, you can compare the effects of market volatilities on Beijing Ultrapower and Tibet Huayu 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 Ultrapower with a short position of Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Ultrapower and Tibet Huayu.

Diversification Opportunities for Beijing Ultrapower and Tibet Huayu

0.31

Correlation Coefficient

Beijing Ultrapower  Tibet Huayu

Weak diversification

The 3 months correlation between Beijing and Tibet is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Ultrapower Software and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining and Beijing Ultrapower 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 Ultrapower Software are associated (or correlated) with Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Beijing Ultrapower i.e., Beijing Ultrapower and Tibet Huayu go up and down completely randomly.

Pair Corralation between Beijing Ultrapower and Tibet Huayu

Assuming the 90 days trading horizon Beijing Ultrapower Software is expected to generate 1.38 times more return on investment than Tibet Huayu. However, Beijing Ultrapower is 1.38 times more volatile than Tibet Huayu Mining. It trades about -0.37 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about -0.67 per unit of risk. If you would invest  1,291  in Beijing Ultrapower Software on October 8, 2024 and sell it today you would lose (203.00) from holding Beijing Ultrapower Software or give up 15.72% of portfolio value over 90 days.

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

Beijing Ultrapower Software  vs.  Tibet Huayu Mining

Beijing Ultrapower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Ultrapower Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tibet Huayu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tibet Huayu Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Beijing Ultrapower and Tibet Huayu

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

The idea behind Beijing Ultrapower Software and Tibet Huayu Mining 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.