Correlation Between Hubei Geoway and Beijing Sanyuan

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

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

Diversification Opportunities for Hubei Geoway and Beijing Sanyuan

0.74

Correlation Coefficient

Hubei Geoway  Beijing Sanyuan

Poor diversification

The 3 months correlation between Hubei and Beijing is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Geoway Investment and Beijing Sanyuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Sanyuan Foods and Hubei Geoway 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 Hubei Geoway Investment are associated (or correlated) with Beijing Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Sanyuan Foods has no effect on the direction of Hubei Geoway i.e., Hubei Geoway and Beijing Sanyuan go up and down completely randomly.

Pair Corralation between Hubei Geoway and Beijing Sanyuan

Assuming the 90 days trading horizon Hubei Geoway Investment is expected to under-perform the Beijing Sanyuan. In addition to that, Hubei Geoway is 1.31 times more volatile than Beijing Sanyuan Foods. It trades about -0.06 of its total potential returns per unit of risk. Beijing Sanyuan Foods is currently generating about -0.01 per unit of volatility. If you would invest  449.00  in Beijing Sanyuan Foods on December 25, 2024 and sell it today you would lose (11.00) from holding Beijing Sanyuan Foods or give up 2.45% of portfolio value over 90 days.

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

Hubei Geoway Investment  vs.  Beijing Sanyuan Foods

Hubei Geoway Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hubei Geoway Investment 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.

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.

Pair Trading with Hubei Geoway and Beijing Sanyuan

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

The idea behind Hubei Geoway Investment and Beijing Sanyuan Foods 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.