Correlation Between China Everbright and Beijing HuaYuanYiTong

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

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

Diversification Opportunities for China Everbright and Beijing HuaYuanYiTong

-0.11

Correlation Coefficient

China Everbright  Beijing HuaYuanYiTong

Good diversification

The 3 months correlation between China and Beijing is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank and Beijing HuaYuanYiTong Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing HuaYuanYiTong and China Everbright 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 China Everbright Bank are associated (or correlated) with Beijing HuaYuanYiTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing HuaYuanYiTong has no effect on the direction of China Everbright i.e., China Everbright and Beijing HuaYuanYiTong go up and down completely randomly.

Pair Corralation between China Everbright and Beijing HuaYuanYiTong

Assuming the 90 days trading horizon China Everbright Bank is expected to generate 0.79 times more return on investment than Beijing HuaYuanYiTong. However, China Everbright Bank is 1.26 times less risky than Beijing HuaYuanYiTong. It trades about 0.0 of its potential returns per unit of risk. Beijing HuaYuanYiTong Thermal is currently generating about -0.54 per unit of risk. If you would invest  375.00  in China Everbright Bank on October 11, 2024 and sell it today you would lose (1.00) from holding China Everbright Bank or give up 0.27% of portfolio value over 90 days.

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

China Everbright Bank  vs.  Beijing HuaYuanYiTong Thermal

China Everbright Bank

Risk-Adjusted Performance

6 of 100

Insignificant

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

Beijing HuaYuanYiTong

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing HuaYuanYiTong Thermal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing HuaYuanYiTong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Everbright and Beijing HuaYuanYiTong

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

The idea behind China Everbright Bank and Beijing HuaYuanYiTong Thermal 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.