Correlation Between Beijing Compass and Industrial

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

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

Diversification Opportunities for Beijing Compass and Industrial

0.18

Correlation Coefficient

Beijing Compass  Industrial

Average diversification

The 3 months correlation between Beijing and Industrial is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Compass Technology 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 Compass 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 Compass Technology 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 Compass i.e., Beijing Compass and Industrial go up and down completely randomly.

Pair Corralation between Beijing Compass and Industrial

Assuming the 90 days trading horizon Beijing Compass Technology is expected to generate 4.38 times more return on investment than Industrial. However, Beijing Compass is 4.38 times more volatile than Industrial and Commercial. It trades about 0.04 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.16 per unit of risk. If you would invest  9,193  in Beijing Compass Technology on October 3, 2024 and sell it today you would earn a total of  402.00  from holding Beijing Compass Technology or generate 4.37% return on investment over 90 days.

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

Beijing Compass Technology  vs.  Industrial and Commercial

Beijing Compass Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Compass Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Compass sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Compass and Industrial

The main advantage of trading using opposite Beijing Compass and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Compass 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 Compass Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.