Correlation Between Dr Peng and Beijing Kingsoft

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

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

Diversification Opportunities for Dr Peng and Beijing Kingsoft

0.53

Correlation Coefficient

Dr Peng  Beijing Kingsoft

Very weak diversification

The 3 months correlation between 600804 and Beijing is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom 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 Dr Peng 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 Dr Peng Telecom 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 Dr Peng i.e., Dr Peng and Beijing Kingsoft go up and down completely randomly.

Pair Corralation between Dr Peng and Beijing Kingsoft

Assuming the 90 days trading horizon Dr Peng Telecom is expected to under-perform the Beijing Kingsoft. In addition to that, Dr Peng is 1.04 times more volatile than Beijing Kingsoft Office. It trades about -0.05 of its total potential returns per unit of risk. Beijing Kingsoft Office is currently generating about 0.04 per unit of volatility. If you would invest  23,250  in Beijing Kingsoft Office on October 24, 2024 and sell it today you would earn a total of  4,730  from holding Beijing Kingsoft Office or generate 20.34% return on investment over 90 days.

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

Dr Peng Telecom  vs.  Beijing Kingsoft Office

Dr Peng Telecom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Kingsoft Office

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kingsoft Office are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kingsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dr Peng and Beijing Kingsoft

The main advantage of trading using opposite Dr Peng and Beijing Kingsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Peng 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 Dr Peng Telecom 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.