Correlation Between Beijing Wandong and Hubei Yingtong

Can any of the company-specific risk be diversified away by investing in both Beijing Wandong and Hubei Yingtong 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 Hubei Yingtong 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 Hubei Yingtong Telecommunication, you can compare the effects of market volatilities on Beijing Wandong and Hubei Yingtong 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 Hubei Yingtong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Wandong and Hubei Yingtong.

Diversification Opportunities for Beijing Wandong and Hubei Yingtong

0.48

Correlation Coefficient

Beijing Wandong  Hubei Yingtong

Very weak diversification

The 3 months correlation between Beijing and Hubei is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wandong Medical and Hubei Yingtong Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Yingtong Telec 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 Hubei Yingtong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Yingtong Telec has no effect on the direction of Beijing Wandong i.e., Beijing Wandong and Hubei Yingtong go up and down completely randomly.

Pair Corralation between Beijing Wandong and Hubei Yingtong

Assuming the 90 days trading horizon Beijing Wandong Medical is expected to under-perform the Hubei Yingtong. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Wandong Medical is 2.06 times less risky than Hubei Yingtong. The stock trades about -0.15 of its potential returns per unit of risk. The Hubei Yingtong Telecommunication is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,301  in Hubei Yingtong Telecommunication on September 22, 2024 and sell it today you would earn a total of  153.00  from holding Hubei Yingtong Telecommunication or generate 11.76% return on investment over 90 days.

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

Beijing Wandong Medical  vs.  Hubei Yingtong Telecommunicati

Beijing Wandong Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wandong Medical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Wandong sustained solid returns over the last few months and may actually be approaching a breakup point.

Hubei Yingtong Telec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Yingtong Telecommunication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Yingtong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Wandong and Hubei Yingtong

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

The idea behind Beijing Wandong Medical and Hubei Yingtong Telecommunication 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.