Correlation Between Beijing Bashi and China National

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

By analyzing existing cross correlation between Beijing Bashi Media and China National Software, you can compare the effects of market volatilities on Beijing Bashi and China National 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 Bashi with a short position of China National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Bashi and China National.

Diversification Opportunities for Beijing Bashi and China National

0.57

Correlation Coefficient

Beijing Bashi  China National

Very weak diversification

The 3 months correlation between Beijing and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Bashi Media and China National Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Software and Beijing Bashi 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 Bashi Media are associated (or correlated) with China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Software has no effect on the direction of Beijing Bashi i.e., Beijing Bashi and China National go up and down completely randomly.

Pair Corralation between Beijing Bashi and China National

Assuming the 90 days trading horizon Beijing Bashi Media is expected to generate 0.93 times more return on investment than China National. However, Beijing Bashi Media is 1.07 times less risky than China National. It trades about 0.04 of its potential returns per unit of risk. China National Software is currently generating about 0.03 per unit of risk. If you would invest  425.00  in Beijing Bashi Media on October 3, 2024 and sell it today you would earn a total of  22.00  from holding Beijing Bashi Media or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Beijing Bashi Media  vs.  China National Software

Beijing Bashi Media

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Bashi Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Bashi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China National Software

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China National Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Beijing Bashi and China National

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

The idea behind Beijing Bashi Media and China National Software 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.