Correlation Between Beijing Sanyuan and Anshan Senyuan

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

Diversification Opportunities for Beijing Sanyuan and Anshan Senyuan

0.02

Correlation Coefficient

Beijing Sanyuan  Anshan Senyuan

Significant diversification

The 3 months correlation between Beijing and Anshan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and Anshan Senyuan Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anshan Senyuan Road 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 Anshan Senyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anshan Senyuan Road has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and Anshan Senyuan go up and down completely randomly.

Pair Corralation between Beijing Sanyuan and Anshan Senyuan

Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to generate 1.14 times more return on investment than Anshan Senyuan. However, Beijing Sanyuan is 1.14 times more volatile than Anshan Senyuan Road. It trades about -0.14 of its potential returns per unit of risk. Anshan Senyuan Road is currently generating about -0.32 per unit of risk. If you would invest  469.00  in Beijing Sanyuan Foods on October 11, 2024 and sell it today you would lose (54.00) from holding Beijing Sanyuan Foods or give up 11.51% of portfolio value over 90 days.

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

Beijing Sanyuan Foods  vs.  Anshan Senyuan Road

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.

Anshan Senyuan Road

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anshan Senyuan Road are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anshan Senyuan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Beijing Sanyuan and Anshan Senyuan

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

The idea behind Beijing Sanyuan Foods and Anshan Senyuan Road 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.