Correlation Between Beijing Cisri and Hunan Nanling

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

By analyzing existing cross correlation between Beijing Cisri Gaona and Hunan Nanling Industrial, you can compare the effects of market volatilities on Beijing Cisri and Hunan Nanling 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 Cisri with a short position of Hunan Nanling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Cisri and Hunan Nanling.

Diversification Opportunities for Beijing Cisri and Hunan Nanling

0.84

Correlation Coefficient

Beijing Cisri  Hunan Nanling

Very poor diversification

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

Pair Corralation between Beijing Cisri and Hunan Nanling

Assuming the 90 days trading horizon Beijing Cisri Gaona is expected to under-perform the Hunan Nanling. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Cisri Gaona is 1.31 times less risky than Hunan Nanling. The stock trades about -0.11 of its potential returns per unit of risk. The Hunan Nanling Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,226  in Hunan Nanling Industrial on September 25, 2024 and sell it today you would earn a total of  70.00  from holding Hunan Nanling Industrial or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Beijing Cisri Gaona  vs.  Hunan Nanling Industrial

Beijing Cisri Gaona

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Cisri Gaona are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Cisri sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Nanling Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Nanling Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Nanling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Cisri and Hunan Nanling

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

The idea behind Beijing Cisri Gaona and Hunan Nanling Industrial 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.