Correlation Between Hua Xia and Beijing Kaiwen

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

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

Diversification Opportunities for Hua Xia and Beijing Kaiwen

0.49

Correlation Coefficient

Hua Xia  Beijing Kaiwen

Very weak diversification

The 3 months correlation between Hua and Beijing is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hua Xia Bank 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 Hua Xia 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 Hua Xia Bank 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 Hua Xia i.e., Hua Xia and Beijing Kaiwen go up and down completely randomly.

Pair Corralation between Hua Xia and Beijing Kaiwen

Assuming the 90 days trading horizon Hua Xia Bank is expected to generate 0.44 times more return on investment than Beijing Kaiwen. However, Hua Xia Bank is 2.3 times less risky than Beijing Kaiwen. It trades about 0.09 of its potential returns per unit of risk. Beijing Kaiwen Education is currently generating about 0.01 per unit of risk. If you would invest  482.00  in Hua Xia Bank on October 1, 2024 and sell it today you would earn a total of  313.00  from holding Hua Xia Bank or generate 64.94% return on investment over 90 days.

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

Hua Xia Bank  vs.  Beijing Kaiwen Education

Hua Xia Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Xia Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hua Xia 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 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 Hua Xia and Beijing Kaiwen

The main advantage of trading using opposite Hua Xia and Beijing Kaiwen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Xia 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 Hua Xia Bank 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.