Correlation Between Beijing Wandong and Sailun Jinyu

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

Diversification Opportunities for Beijing Wandong and Sailun Jinyu

0.46

Correlation Coefficient

Beijing Wandong  Sailun Jinyu

Very weak diversification

The 3 months correlation between Beijing and Sailun is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wandong Medical and Sailun Jinyu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sailun Jinyu Group 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 Sailun Jinyu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sailun Jinyu Group has no effect on the direction of Beijing Wandong i.e., Beijing Wandong and Sailun Jinyu go up and down completely randomly.

Pair Corralation between Beijing Wandong and Sailun Jinyu

Assuming the 90 days trading horizon Beijing Wandong Medical is expected to generate 1.62 times more return on investment than Sailun Jinyu. However, Beijing Wandong is 1.62 times more volatile than Sailun Jinyu Group. It trades about -0.08 of its potential returns per unit of risk. Sailun Jinyu Group is currently generating about -0.15 per unit of risk. If you would invest  1,696  in Beijing Wandong Medical on September 20, 2024 and sell it today you would lose (71.00) from holding Beijing Wandong Medical or give up 4.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Beijing Wandong Medical  vs.  Sailun Jinyu Group

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.

Sailun Jinyu Group

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Beijing Wandong Medical and Sailun Jinyu Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.