Correlation Between Hubei Xingfa and Beijing Wandong

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

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

Diversification Opportunities for Hubei Xingfa and Beijing Wandong

0.46

Correlation Coefficient

Hubei Xingfa  Beijing Wandong

Very weak diversification

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

Pair Corralation between Hubei Xingfa and Beijing Wandong

Assuming the 90 days trading horizon Hubei Xingfa Chemicals is expected to generate 0.98 times more return on investment than Beijing Wandong. However, Hubei Xingfa Chemicals is 1.02 times less risky than Beijing Wandong. It trades about -0.02 of its potential returns per unit of risk. Beijing Wandong Medical is currently generating about -0.02 per unit of risk. If you would invest  2,889  in Hubei Xingfa Chemicals on October 8, 2024 and sell it today you would lose (751.00) from holding Hubei Xingfa Chemicals or give up 26.0% of portfolio value over 90 days.

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

Hubei Xingfa Chemicals  vs.  Beijing Wandong Medical

Hubei Xingfa Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Xingfa Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hubei Xingfa and Beijing Wandong

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

The idea behind Hubei Xingfa Chemicals and Beijing Wandong Medical 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.