Correlation Between Beijing Sanyuan and Beijing Jiaman

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

Diversification Opportunities for Beijing Sanyuan and Beijing Jiaman

0.89

Correlation Coefficient

Beijing Sanyuan  Beijing Jiaman

Very poor diversification

The 3 months correlation between Beijing and Beijing is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and Beijing Jiaman Dress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Jiaman Dress 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 Jiaman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Jiaman Dress has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Beijing Sanyuan and Beijing Jiaman

Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to generate 1.81 times more return on investment than Beijing Jiaman. However, Beijing Sanyuan is 1.81 times more volatile than Beijing Jiaman Dress. It trades about 0.17 of its potential returns per unit of risk. Beijing Jiaman Dress is currently generating about 0.12 per unit of risk. If you would invest  407.00  in Beijing Sanyuan Foods on December 2, 2024 and sell it today you would earn a total of  18.00  from holding Beijing Sanyuan Foods or generate 4.42% return on investment over 90 days.

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

Beijing Sanyuan Foods  vs.  Beijing Jiaman Dress

Beijing Sanyuan Foods

Risk-Adjusted Performance

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 Jiaman Dress

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Jiaman Dress 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 Beijing Sanyuan and Beijing Jiaman

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

The idea behind Beijing Sanyuan Foods and Beijing Jiaman Dress 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.