Correlation Between Beken Corp and Shijiazhuang Tonhe

Can any of the company-specific risk be diversified away by investing in both Beken Corp and Shijiazhuang Tonhe 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 Beken Corp and Shijiazhuang Tonhe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beken Corp and Shijiazhuang Tonhe Electronics, you can compare the effects of market volatilities on Beken Corp and Shijiazhuang Tonhe 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 Beken Corp with a short position of Shijiazhuang Tonhe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beken Corp and Shijiazhuang Tonhe.

Diversification Opportunities for Beken Corp and Shijiazhuang Tonhe

0.87

Correlation Coefficient

Beken Corp  Shijiazhuang Tonhe

Very poor diversification

The 3 months correlation between Beken and Shijiazhuang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Beken Corp and Shijiazhuang Tonhe Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shijiazhuang Tonhe and Beken Corp 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 Beken Corp are associated (or correlated) with Shijiazhuang Tonhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shijiazhuang Tonhe has no effect on the direction of Beken Corp i.e., Beken Corp and Shijiazhuang Tonhe go up and down completely randomly.

Pair Corralation between Beken Corp and Shijiazhuang Tonhe

Assuming the 90 days trading horizon Beken Corp is expected to generate 1.52 times less return on investment than Shijiazhuang Tonhe. But when comparing it to its historical volatility, Beken Corp is 1.28 times less risky than Shijiazhuang Tonhe. It trades about 0.03 of its potential returns per unit of risk. Shijiazhuang Tonhe Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,403  in Shijiazhuang Tonhe Electronics on September 24, 2024 and sell it today you would earn a total of  411.00  from holding Shijiazhuang Tonhe Electronics or generate 29.29% return on investment over 90 days.

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

Beken Corp  vs.  Shijiazhuang Tonhe Electronics

Beken Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beken Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beken Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Shijiazhuang Tonhe

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shijiazhuang Tonhe Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shijiazhuang Tonhe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beken Corp and Shijiazhuang Tonhe

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

The idea behind Beken Corp and Shijiazhuang Tonhe Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.