Correlation Between Ping An and Beijing YanDong

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

By analyzing existing cross correlation between Ping An Insurance and Beijing YanDong MicroElectronic, you can compare the effects of market volatilities on Ping An and Beijing YanDong 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 Ping An with a short position of Beijing YanDong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Beijing YanDong.

Diversification Opportunities for Ping An and Beijing YanDong

-0.08

Correlation Coefficient

Ping An  Beijing YanDong

Good diversification

The 3 months correlation between Ping and Beijing is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Beijing YanDong MicroElectroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing YanDong Micr and Ping An 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 Ping An Insurance are associated (or correlated) with Beijing YanDong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing YanDong Micr has no effect on the direction of Ping An i.e., Ping An and Beijing YanDong go up and down completely randomly.

Pair Corralation between Ping An and Beijing YanDong

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.38 times more return on investment than Beijing YanDong. However, Ping An Insurance is 2.6 times less risky than Beijing YanDong. It trades about -0.34 of its potential returns per unit of risk. Beijing YanDong MicroElectronic is currently generating about -0.17 per unit of risk. If you would invest  5,490  in Ping An Insurance on October 12, 2024 and sell it today you would lose (509.00) from holding Ping An Insurance or give up 9.27% of portfolio value over 90 days.

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

Ping An Insurance  vs.  Beijing YanDong MicroElectroni

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing YanDong Micr

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing YanDong MicroElectronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing YanDong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Beijing YanDong

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

The idea behind Ping An Insurance and Beijing YanDong MicroElectronic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.