Correlation Between Kangxin New and Beijing Seeyon

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

By analyzing existing cross correlation between Kangxin New Materials and Beijing Seeyon Internet, you can compare the effects of market volatilities on Kangxin New and Beijing Seeyon 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 Kangxin New with a short position of Beijing Seeyon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kangxin New and Beijing Seeyon.

Diversification Opportunities for Kangxin New and Beijing Seeyon

0.28

Correlation Coefficient

Kangxin New  Beijing Seeyon

Modest diversification

The 3 months correlation between Kangxin and Beijing is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kangxin New Materials and Beijing Seeyon Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Seeyon Internet and Kangxin New 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 Kangxin New Materials are associated (or correlated) with Beijing Seeyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Seeyon Internet has no effect on the direction of Kangxin New i.e., Kangxin New and Beijing Seeyon go up and down completely randomly.

Pair Corralation between Kangxin New and Beijing Seeyon

Assuming the 90 days trading horizon Kangxin New is expected to generate 15.75 times less return on investment than Beijing Seeyon. But when comparing it to its historical volatility, Kangxin New Materials is 1.85 times less risky than Beijing Seeyon. It trades about 0.02 of its potential returns per unit of risk. Beijing Seeyon Internet is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,117  in Beijing Seeyon Internet on December 26, 2024 and sell it today you would earn a total of  1,322  from holding Beijing Seeyon Internet or generate 62.45% return on investment over 90 days.

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

Kangxin New Materials  vs.  Beijing Seeyon Internet

Kangxin New Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kangxin New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Seeyon Internet

Risk-Adjusted Performance

Good

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

Pair Trading with Kangxin New and Beijing Seeyon

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

The idea behind Kangxin New Materials and Beijing Seeyon Internet 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.