Correlation Between Agricultural Bank and Beijing Wantai

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

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

Diversification Opportunities for Agricultural Bank and Beijing Wantai

0.44

Correlation Coefficient

Agricultural Bank  Beijing Wantai

Very weak diversification

The 3 months correlation between Agricultural and Beijing is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and Beijing Wantai Biological in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wantai Biological and Agricultural Bank 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 Agricultural Bank of are associated (or correlated) with Beijing Wantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wantai Biological has no effect on the direction of Agricultural Bank i.e., Agricultural Bank and Beijing Wantai go up and down completely randomly.

Pair Corralation between Agricultural Bank and Beijing Wantai

Assuming the 90 days trading horizon Agricultural Bank of is expected to generate 0.71 times more return on investment than Beijing Wantai. However, Agricultural Bank of is 1.41 times less risky than Beijing Wantai. It trades about 0.35 of its potential returns per unit of risk. Beijing Wantai Biological is currently generating about 0.15 per unit of risk. If you would invest  470.00  in Agricultural Bank of on September 23, 2024 and sell it today you would earn a total of  34.00  from holding Agricultural Bank of or generate 7.23% return on investment over 90 days.

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

Agricultural Bank of  vs.  Beijing Wantai Biological

Agricultural Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agricultural Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beijing Wantai Biological

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wantai Biological are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Wantai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Agricultural Bank and Beijing Wantai

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

The idea behind Agricultural Bank of and Beijing Wantai Biological 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.