Correlation Between Shandong Publishing and Beijing Bashi

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

By analyzing existing cross correlation between Shandong Publishing Media and Beijing Bashi Media, you can compare the effects of market volatilities on Shandong Publishing and Beijing Bashi 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 Shandong Publishing with a short position of Beijing Bashi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and Beijing Bashi.

Diversification Opportunities for Shandong Publishing and Beijing Bashi

-0.35

Correlation Coefficient

Shandong Publishing  Beijing Bashi

Very good diversification

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

Pair Corralation between Shandong Publishing and Beijing Bashi

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Beijing Bashi. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.71 times less risky than Beijing Bashi. The stock trades about -0.12 of its potential returns per unit of risk. The Beijing Bashi Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  479.00  in Beijing Bashi Media on December 26, 2024 and sell it today you would earn a total of  21.00  from holding Beijing Bashi Media or generate 4.38% return on investment over 90 days.

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

Shandong Publishing Media  vs.  Beijing Bashi Media

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing Bashi Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Bashi Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Beijing Bashi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shandong Publishing and Beijing Bashi

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

The idea behind Shandong Publishing Media and Beijing Bashi Media 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.