Correlation Between Hengerda New and Beijing Kaiwen

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

By analyzing existing cross correlation between Hengerda New Materials and Beijing Kaiwen Education, you can compare the effects of market volatilities on Hengerda New and Beijing Kaiwen 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 Hengerda New with a short position of Beijing Kaiwen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengerda New and Beijing Kaiwen.

Diversification Opportunities for Hengerda New and Beijing Kaiwen

0.77

Correlation Coefficient

Hengerda New  Beijing Kaiwen

Poor diversification

The 3 months correlation between Hengerda and Beijing is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Beijing Kaiwen Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kaiwen Education and Hengerda New 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 Hengerda New Materials are associated (or correlated) with Beijing Kaiwen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kaiwen Education has no effect on the direction of Hengerda New i.e., Hengerda New and Beijing Kaiwen go up and down completely randomly.

Pair Corralation between Hengerda New and Beijing Kaiwen

Assuming the 90 days trading horizon Hengerda New is expected to generate 5.27 times less return on investment than Beijing Kaiwen. But when comparing it to its historical volatility, Hengerda New Materials is 1.19 times less risky than Beijing Kaiwen. It trades about 0.02 of its potential returns per unit of risk. Beijing Kaiwen Education is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Beijing Kaiwen Education on September 29, 2024 and sell it today you would earn a total of  135.00  from holding Beijing Kaiwen Education or generate 41.28% return on investment over 90 days.

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

Hengerda New Materials  vs.  Beijing Kaiwen Education

Hengerda New Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hengerda New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Kaiwen Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hengerda New and Beijing Kaiwen

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

The idea behind Hengerda New Materials and Beijing Kaiwen Education 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.