Correlation Between Beijing Wandong and Maoming Petro

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

By analyzing existing cross correlation between Beijing Wandong Medical and Maoming Petro Chemical Shihua, you can compare the effects of market volatilities on Beijing Wandong and Maoming Petro 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 Wandong with a short position of Maoming Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Wandong and Maoming Petro.

Diversification Opportunities for Beijing Wandong and Maoming Petro

-0.12

Correlation Coefficient

Beijing Wandong  Maoming Petro

Good diversification

The 3 months correlation between Beijing and Maoming is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wandong Medical and Maoming Petro Chemical Shihua in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maoming Petro Chemical and Beijing Wandong 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 Wandong Medical are associated (or correlated) with Maoming Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maoming Petro Chemical has no effect on the direction of Beijing Wandong i.e., Beijing Wandong and Maoming Petro go up and down completely randomly.

Pair Corralation between Beijing Wandong and Maoming Petro

Assuming the 90 days trading horizon Beijing Wandong Medical is expected to generate 1.09 times more return on investment than Maoming Petro. However, Beijing Wandong is 1.09 times more volatile than Maoming Petro Chemical Shihua. It trades about 0.09 of its potential returns per unit of risk. Maoming Petro Chemical Shihua is currently generating about -0.02 per unit of risk. If you would invest  1,528  in Beijing Wandong Medical on December 30, 2024 and sell it today you would earn a total of  160.00  from holding Beijing Wandong Medical or generate 10.47% return on investment over 90 days.

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

Beijing Wandong Medical  vs.  Maoming Petro Chemical Shihua

Beijing Wandong Medical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wandong Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Wandong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Maoming Petro Chemical

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Beijing Wandong Medical and Maoming Petro Chemical Shihua 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.