Correlation Between Beijing Enlight and Guangzhou Jinyi

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

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

Diversification Opportunities for Beijing Enlight and Guangzhou Jinyi

0.08

Correlation Coefficient

Beijing Enlight  Guangzhou Jinyi

Significant diversification

The 3 months correlation between Beijing and Guangzhou is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Enlight Media and Guangzhou Jinyi Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jinyi Media and Beijing Enlight 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 Enlight Media are associated (or correlated) with Guangzhou Jinyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jinyi Media has no effect on the direction of Beijing Enlight i.e., Beijing Enlight and Guangzhou Jinyi go up and down completely randomly.

Pair Corralation between Beijing Enlight and Guangzhou Jinyi

Assuming the 90 days trading horizon Beijing Enlight Media is expected to generate 1.54 times more return on investment than Guangzhou Jinyi. However, Beijing Enlight is 1.54 times more volatile than Guangzhou Jinyi Media. It trades about 0.22 of its potential returns per unit of risk. Guangzhou Jinyi Media is currently generating about 0.0 per unit of risk. If you would invest  957.00  in Beijing Enlight Media on December 27, 2024 and sell it today you would earn a total of  1,184  from holding Beijing Enlight Media or generate 123.72% return on investment over 90 days.

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

Beijing Enlight Media  vs.  Guangzhou Jinyi Media

Beijing Enlight Media

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enlight Media are ranked lower than 17 (%) 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.

Guangzhou Jinyi Media

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Beijing Enlight and Guangzhou Jinyi

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

The idea behind Beijing Enlight Media and Guangzhou Jinyi 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.