Correlation Between Beijing Sanyuan and CSSC Offshore

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

Diversification Opportunities for Beijing Sanyuan and CSSC Offshore

-0.16

Correlation Coefficient

Beijing Sanyuan  CSSC Offshore

Good diversification

The 3 months correlation between Beijing and CSSC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and CSSC Offshore go up and down completely randomly.

Pair Corralation between Beijing Sanyuan and CSSC Offshore

Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to under-perform the CSSC Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Sanyuan Foods is 1.41 times less risky than CSSC Offshore. The stock trades about 0.0 of its potential returns per unit of risk. The CSSC Offshore Marine is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,041  in CSSC Offshore Marine on October 4, 2024 and sell it today you would earn a total of  257.00  from holding CSSC Offshore Marine or generate 12.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Beijing Sanyuan Foods  vs.  CSSC Offshore Marine

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.

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSSC Offshore Marine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Beijing Sanyuan and CSSC Offshore

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

The idea behind Beijing Sanyuan Foods and CSSC Offshore Marine 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.