Correlation Between Beijing Wantai and SUNSEA Telecommunicatio

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

By analyzing existing cross correlation between Beijing Wantai Biological and SUNSEA Telecommunications Co, you can compare the effects of market volatilities on Beijing Wantai and SUNSEA Telecommunicatio 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 Beijing Wantai with a short position of SUNSEA Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Wantai and SUNSEA Telecommunicatio.

Diversification Opportunities for Beijing Wantai and SUNSEA Telecommunicatio

0.27

Correlation Coefficient

Beijing Wantai  SUNSEA Telecommunicatio

Modest diversification

The 3 months correlation between Beijing and SUNSEA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wantai Biological and SUNSEA Telecommunications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNSEA Telecommunicatio and Beijing Wantai 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 Beijing Wantai Biological are associated (or correlated) with SUNSEA Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNSEA Telecommunicatio has no effect on the direction of Beijing Wantai i.e., Beijing Wantai and SUNSEA Telecommunicatio go up and down completely randomly.

Pair Corralation between Beijing Wantai and SUNSEA Telecommunicatio

Assuming the 90 days trading horizon Beijing Wantai Biological is expected to generate 0.64 times more return on investment than SUNSEA Telecommunicatio. However, Beijing Wantai Biological is 1.55 times less risky than SUNSEA Telecommunicatio. It trades about 0.06 of its potential returns per unit of risk. SUNSEA Telecommunications Co is currently generating about 0.03 per unit of risk. If you would invest  4,855  in Beijing Wantai Biological on October 5, 2024 and sell it today you would earn a total of  2,213  from holding Beijing Wantai Biological or generate 45.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.67%
Values	Daily Returns

Beijing Wantai Biological  vs.  SUNSEA Telecommunications Co

Beijing Wantai Biological

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Wantai Biological 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.

SUNSEA Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Beijing Wantai and SUNSEA Telecommunicatio

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

The idea behind Beijing Wantai Biological and SUNSEA Telecommunications Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.