Correlation Between China National and Beijing Kingsoft

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

By analyzing existing cross correlation between China National Software and Beijing Kingsoft Office, you can compare the effects of market volatilities on China National and Beijing Kingsoft 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 China National with a short position of Beijing Kingsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of China National and Beijing Kingsoft.

Diversification Opportunities for China National and Beijing Kingsoft

0.57

Correlation Coefficient

China National  Beijing Kingsoft

Very weak diversification

The 3 months correlation between China and Beijing is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding China National Software and Beijing Kingsoft Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kingsoft Office and China National 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 China National Software are associated (or correlated) with Beijing Kingsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kingsoft Office has no effect on the direction of China National i.e., China National and Beijing Kingsoft go up and down completely randomly.

Pair Corralation between China National and Beijing Kingsoft

Assuming the 90 days trading horizon China National Software is expected to under-perform the Beijing Kingsoft. But the stock apears to be less risky and, when comparing its historical volatility, China National Software is 1.49 times less risky than Beijing Kingsoft. The stock trades about -0.05 of its potential returns per unit of risk. The Beijing Kingsoft Office is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  28,833  in Beijing Kingsoft Office on December 25, 2024 and sell it today you would earn a total of  2,509  from holding Beijing Kingsoft Office or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

China National Software  vs.  Beijing Kingsoft Office

China National Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days China National Software 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 Kingsoft Office

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kingsoft Office are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kingsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China National and Beijing Kingsoft

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

The idea behind China National Software and Beijing Kingsoft Office 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.