Correlation Between Beijing Sanyuan and Beijing Ultrapower

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

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

Diversification Opportunities for Beijing Sanyuan and Beijing Ultrapower

0.23

Correlation Coefficient

Beijing Sanyuan  Beijing Ultrapower

Modest diversification

The 3 months correlation between Beijing and Beijing is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and Beijing Ultrapower Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Ultrapower and Beijing Sanyuan 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 Sanyuan Foods are associated (or correlated) with Beijing Ultrapower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Ultrapower has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and Beijing Ultrapower go up and down completely randomly.

Pair Corralation between Beijing Sanyuan and Beijing Ultrapower

Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to under-perform the Beijing Ultrapower. In addition to that, Beijing Sanyuan is 1.09 times more volatile than Beijing Ultrapower Software. It trades about -0.2 of its total potential returns per unit of risk. Beijing Ultrapower Software is currently generating about -0.03 per unit of volatility. If you would invest  1,205  in Beijing Ultrapower Software on October 24, 2024 and sell it today you would lose (20.00) from holding Beijing Ultrapower Software or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Beijing Sanyuan Foods  vs.  Beijing Ultrapower Software

Beijing Sanyuan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Beijing Ultrapower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Ultrapower Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Beijing Ultrapower 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 Sanyuan and Beijing Ultrapower

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

The idea behind Beijing Sanyuan Foods and Beijing Ultrapower 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.