Correlation Between Beijing Sanyuan and Touchstone International

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

Diversification Opportunities for Beijing Sanyuan and Touchstone International

0.06

Correlation Coefficient

Beijing Sanyuan  Touchstone International

Significant diversification

The 3 months correlation between Beijing and Touchstone is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and Touchstone International Medic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International 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 Touchstone International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone International has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and Touchstone International go up and down completely randomly.

Pair Corralation between Beijing Sanyuan and Touchstone International

Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to under-perform the Touchstone International. In addition to that, Beijing Sanyuan is 1.09 times more volatile than Touchstone International Medical. It trades about -0.01 of its total potential returns per unit of risk. Touchstone International Medical is currently generating about 0.08 per unit of volatility. If you would invest  1,760  in Touchstone International Medical on December 28, 2024 and sell it today you would earn a total of  138.00  from holding Touchstone International Medical or generate 7.84% return on investment over 90 days.

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

Beijing Sanyuan Foods  vs.  Touchstone International Medic

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.

Touchstone International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Touchstone International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Beijing Sanyuan and Touchstone International

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

The idea behind Beijing Sanyuan Foods and Touchstone International Medical 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.