Correlation Between Beijing Enlight and Industrial

Can any of the company-specific risk be diversified away by investing in both Beijing Enlight and Industrial 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 Industrial 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 Industrial and Commercial, you can compare the effects of market volatilities on Beijing Enlight and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Enlight and Industrial.

Diversification Opportunities for Beijing Enlight and Industrial

0.68

Correlation Coefficient

Beijing Enlight  Industrial

Poor diversification

The 3 months correlation between Beijing and Industrial is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Enlight Media and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Beijing Enlight i.e., Beijing Enlight and Industrial go up and down completely randomly.

Pair Corralation between Beijing Enlight and Industrial

Assuming the 90 days trading horizon Beijing Enlight Media is expected to generate 6.51 times more return on investment than Industrial. However, Beijing Enlight is 6.51 times more volatile than Industrial and Commercial. It trades about 0.22 of its potential returns per unit of risk. Industrial and Commercial is currently generating about -0.01 per unit of risk. If you would invest  943.00  in Beijing Enlight Media on December 28, 2024 and sell it today you would earn a total of  1,180  from holding Beijing Enlight Media or generate 125.13% return on investment over 90 days.

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

Beijing Enlight Media  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial 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 Industrial

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

The idea behind Beijing Enlight Media and Industrial and Commercial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.