Correlation Between Beijing Wandong and Sihui Fuji

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

Diversification Opportunities for Beijing Wandong and Sihui Fuji

0.58

Correlation Coefficient

Beijing Wandong  Sihui Fuji

Very weak diversification

The 3 months correlation between Beijing and Sihui is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wandong Medical and Sihui Fuji Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sihui Fuji Electronics 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 Sihui Fuji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sihui Fuji Electronics has no effect on the direction of Beijing Wandong i.e., Beijing Wandong and Sihui Fuji go up and down completely randomly.

Pair Corralation between Beijing Wandong and Sihui Fuji

Assuming the 90 days trading horizon Beijing Wandong Medical is expected to generate 0.88 times more return on investment than Sihui Fuji. However, Beijing Wandong Medical is 1.14 times less risky than Sihui Fuji. It trades about 0.0 of its potential returns per unit of risk. Sihui Fuji Electronics is currently generating about -0.01 per unit of risk. If you would invest  1,598  in Beijing Wandong Medical on October 1, 2024 and sell it today you would lose (45.00) from holding Beijing Wandong Medical or give up 2.82% of portfolio value over 90 days.

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

Beijing Wandong Medical  vs.  Sihui Fuji Electronics

Beijing Wandong Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sihui Fuji Electronics

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Sihui Fuji Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sihui Fuji 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 Sihui Fuji

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

The idea behind Beijing Wandong Medical and Sihui Fuji Electronics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..