Correlation Between China Building and Beijing Roborock

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

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

Diversification Opportunities for China Building and Beijing Roborock

-0.55

Correlation Coefficient

China Building  Beijing Roborock

Excellent diversification

The 3 months correlation between China and Beijing is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding China Building Material and Beijing Roborock Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Roborock Tec and China Building 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 Building Material are associated (or correlated) with Beijing Roborock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Roborock Tec has no effect on the direction of China Building i.e., China Building and Beijing Roborock go up and down completely randomly.

Pair Corralation between China Building and Beijing Roborock

Assuming the 90 days trading horizon China Building Material is expected to under-perform the Beijing Roborock. In addition to that, China Building is 1.41 times more volatile than Beijing Roborock Technology. It trades about -0.19 of its total potential returns per unit of risk. Beijing Roborock Technology is currently generating about 0.1 per unit of volatility. If you would invest  22,651  in Beijing Roborock Technology on October 9, 2024 and sell it today you would earn a total of  868.00  from holding Beijing Roborock Technology or generate 3.83% return on investment over 90 days.

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

China Building Material  vs.  Beijing Roborock Technology

China Building Material

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Building Material are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Building may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Beijing Roborock Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Roborock Technology 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 China Building and Beijing Roborock

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

The idea behind China Building Material and Beijing Roborock 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..