Correlation Between Huaibei Mining and Beijing Jiaman

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

By analyzing existing cross correlation between Huaibei Mining Holdings and Beijing Jiaman Dress, you can compare the effects of market volatilities on Huaibei Mining and Beijing Jiaman 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 Huaibei Mining with a short position of Beijing Jiaman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaibei Mining and Beijing Jiaman.

Diversification Opportunities for Huaibei Mining and Beijing Jiaman

0.35

Correlation Coefficient

Huaibei Mining  Beijing Jiaman

Weak diversification

The 3 months correlation between Huaibei and Beijing is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Huaibei Mining Holdings and Beijing Jiaman Dress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Jiaman Dress and Huaibei Mining 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 Huaibei Mining Holdings are associated (or correlated) with Beijing Jiaman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Jiaman Dress has no effect on the direction of Huaibei Mining i.e., Huaibei Mining and Beijing Jiaman go up and down completely randomly.

Pair Corralation between Huaibei Mining and Beijing Jiaman

Assuming the 90 days trading horizon Huaibei Mining Holdings is expected to under-perform the Beijing Jiaman. But the stock apears to be less risky and, when comparing its historical volatility, Huaibei Mining Holdings is 1.06 times less risky than Beijing Jiaman. The stock trades about -0.03 of its potential returns per unit of risk. The Beijing Jiaman Dress is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,375  in Beijing Jiaman Dress on September 25, 2024 and sell it today you would lose (327.00) from holding Beijing Jiaman Dress or give up 13.77% of portfolio value over 90 days.

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

Huaibei Mining Holdings  vs.  Beijing Jiaman Dress

Huaibei Mining Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaibei Mining Holdings 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 Jiaman Dress

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Jiaman Dress are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Jiaman sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaibei Mining and Beijing Jiaman

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

The idea behind Huaibei Mining Holdings and Beijing Jiaman Dress 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.