Correlation Between Western Mining and Beijing Kaiwen

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

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

Diversification Opportunities for Western Mining and Beijing Kaiwen

0.04

Correlation Coefficient

Western Mining  Beijing Kaiwen

Significant diversification

The 3 months correlation between Western and Beijing is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Western Mining Co and Beijing Kaiwen Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kaiwen Education and Western 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 Western Mining Co are associated (or correlated) with Beijing Kaiwen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kaiwen Education has no effect on the direction of Western Mining i.e., Western Mining and Beijing Kaiwen go up and down completely randomly.

Pair Corralation between Western Mining and Beijing Kaiwen

Assuming the 90 days trading horizon Western Mining Co is expected to generate 0.67 times more return on investment than Beijing Kaiwen. However, Western Mining Co is 1.49 times less risky than Beijing Kaiwen. It trades about 0.04 of its potential returns per unit of risk. Beijing Kaiwen Education is currently generating about 0.03 per unit of risk. If you would invest  1,455  in Western Mining Co on October 24, 2024 and sell it today you would earn a total of  314.00  from holding Western Mining Co or generate 21.58% return on investment over 90 days.

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

Western Mining Co  vs.  Beijing Kaiwen Education

Western Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Kaiwen Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Kaiwen Education 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.

Pair Trading with Western Mining and Beijing Kaiwen

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

The idea behind Western Mining Co and Beijing Kaiwen Education 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.