Correlation Between Shandong Rike and Beken Corp

Can any of the company-specific risk be diversified away by investing in both Shandong Rike and Beken Corp 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 Shandong Rike and Beken Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Rike Chemical and Beken Corp, you can compare the effects of market volatilities on Shandong Rike and Beken Corp 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 Shandong Rike with a short position of Beken Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Rike and Beken Corp.

Diversification Opportunities for Shandong Rike and Beken Corp

0.09

Correlation Coefficient

Shandong Rike  Beken Corp

Significant diversification

The 3 months correlation between Shandong and Beken is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Rike Chemical and Beken Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beken Corp and Shandong Rike 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 Shandong Rike Chemical are associated (or correlated) with Beken Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beken Corp has no effect on the direction of Shandong Rike i.e., Shandong Rike and Beken Corp go up and down completely randomly.

Pair Corralation between Shandong Rike and Beken Corp

Assuming the 90 days trading horizon Shandong Rike Chemical is expected to under-perform the Beken Corp. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Rike Chemical is 1.72 times less risky than Beken Corp. The stock trades about -0.05 of its potential returns per unit of risk. The Beken Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,809  in Beken Corp on October 26, 2024 and sell it today you would earn a total of  870.00  from holding Beken Corp or generate 30.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Shandong Rike Chemical  vs.  Beken Corp

Shandong Rike Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Beken Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beken Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beken Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Rike and Beken Corp

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

The idea behind Shandong Rike Chemical and Beken Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.