Correlation Between Chengdu Kanghua and Beijing Venustech

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

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

Diversification Opportunities for Chengdu Kanghua and Beijing Venustech

0.64

Correlation Coefficient

Chengdu Kanghua  Beijing Venustech

Poor diversification

The 3 months correlation between Chengdu and Beijing is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and Beijing Venustech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Venustech and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with Beijing Venustech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Venustech has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and Beijing Venustech go up and down completely randomly.

Pair Corralation between Chengdu Kanghua and Beijing Venustech

Assuming the 90 days trading horizon Chengdu Kanghua Biological is expected to generate 0.91 times more return on investment than Beijing Venustech. However, Chengdu Kanghua Biological is 1.1 times less risky than Beijing Venustech. It trades about -0.24 of its potential returns per unit of risk. Beijing Venustech is currently generating about -0.33 per unit of risk. If you would invest  5,800  in Chengdu Kanghua Biological on October 10, 2024 and sell it today you would lose (568.00) from holding Chengdu Kanghua Biological or give up 9.79% of portfolio value over 90 days.

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

Chengdu Kanghua Biological  vs.  Beijing Venustech

Chengdu Kanghua Biol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chengdu Kanghua Biological has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing Venustech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Venustech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chengdu Kanghua and Beijing Venustech

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

The idea behind Chengdu Kanghua Biological and Beijing Venustech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.