Correlation Between Sichuan Hebang and Beijing Seeyon

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

By analyzing existing cross correlation between Sichuan Hebang Biotechnology and Beijing Seeyon Internet, you can compare the effects of market volatilities on Sichuan Hebang and Beijing Seeyon 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 Sichuan Hebang with a short position of Beijing Seeyon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Hebang and Beijing Seeyon.

Diversification Opportunities for Sichuan Hebang and Beijing Seeyon

0.63

Correlation Coefficient

Sichuan Hebang  Beijing Seeyon

Poor diversification

The 3 months correlation between Sichuan and Beijing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Hebang Biotechnology and Beijing Seeyon Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Seeyon Internet and Sichuan Hebang 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 Sichuan Hebang Biotechnology are associated (or correlated) with Beijing Seeyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Seeyon Internet has no effect on the direction of Sichuan Hebang i.e., Sichuan Hebang and Beijing Seeyon go up and down completely randomly.

Pair Corralation between Sichuan Hebang and Beijing Seeyon

Assuming the 90 days trading horizon Sichuan Hebang Biotechnology is expected to generate 0.5 times more return on investment than Beijing Seeyon. However, Sichuan Hebang Biotechnology is 2.0 times less risky than Beijing Seeyon. It trades about -0.02 of its potential returns per unit of risk. Beijing Seeyon Internet is currently generating about -0.03 per unit of risk. If you would invest  232.00  in Sichuan Hebang Biotechnology on October 9, 2024 and sell it today you would lose (35.00) from holding Sichuan Hebang Biotechnology or give up 15.09% of portfolio value over 90 days.

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

Sichuan Hebang Biotechnology  vs.  Beijing Seeyon Internet

Sichuan Hebang Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Hebang Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sichuan Hebang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Seeyon Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Seeyon Internet 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.

Pair Trading with Sichuan Hebang and Beijing Seeyon

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

The idea behind Sichuan Hebang Biotechnology and Beijing Seeyon Internet 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.