Correlation Between Changchun Engley and Beijing Compass

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Can any of the company-specific risk be diversified away by investing in both Changchun Engley and Beijing Compass 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 Changchun Engley and Beijing Compass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Changchun Engley Automobile and Beijing Compass Technology, you can compare the effects of market volatilities on Changchun Engley and Beijing Compass 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 Changchun Engley with a short position of Beijing Compass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Engley and Beijing Compass.

Diversification Opportunities for Changchun Engley and Beijing Compass

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Changchun and Beijing is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Beijing Compass Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Compass Tech and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Beijing Compass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Compass Tech has no effect on the direction of Changchun Engley i.e., Changchun Engley and Beijing Compass go up and down completely randomly.

Pair Corralation between Changchun Engley and Beijing Compass

Assuming the 90 days trading horizon Changchun Engley Automobile is expected to generate 0.58 times more return on investment than Beijing Compass. However, Changchun Engley Automobile is 1.71 times less risky than Beijing Compass. It trades about -0.13 of its potential returns per unit of risk. Beijing Compass Technology is currently generating about -0.13 per unit of risk. If you would invest  428.00  in Changchun Engley Automobile on October 9, 2024 and sell it today you would lose (57.00) from holding Changchun Engley Automobile or give up 13.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Changchun Engley Automobile  vs.  Beijing Compass Technology

 Performance 
       Timeline  
Changchun Engley Aut 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Changchun Engley Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changchun Engley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Beijing Compass Tech 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Compass Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Compass may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Changchun Engley and Beijing Compass Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changchun Engley and Beijing Compass

The main advantage of trading using opposite Changchun Engley and Beijing Compass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changchun Engley position performs unexpectedly, Beijing Compass 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 Compass will offset losses from the drop in Beijing Compass' long position.
The idea behind Changchun Engley Automobile and Beijing Compass Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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