Correlation Between Beijing Wantai and Jiangsu Hoperun

Can any of the company-specific risk be diversified away by investing in both Beijing Wantai and Jiangsu Hoperun 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 Jiangsu Hoperun 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 Jiangsu Hoperun Software, you can compare the effects of market volatilities on Beijing Wantai and Jiangsu Hoperun 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 Jiangsu Hoperun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Wantai and Jiangsu Hoperun.

Diversification Opportunities for Beijing Wantai and Jiangsu Hoperun

0.37

Correlation Coefficient

Beijing Wantai  Jiangsu Hoperun

Weak diversification

The 3 months correlation between Beijing and Jiangsu is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wantai Biological and Jiangsu Hoperun Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Hoperun Software 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 Jiangsu Hoperun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Hoperun Software has no effect on the direction of Beijing Wantai i.e., Beijing Wantai and Jiangsu Hoperun go up and down completely randomly.

Pair Corralation between Beijing Wantai and Jiangsu Hoperun

Assuming the 90 days trading horizon Beijing Wantai Biological is expected to under-perform the Jiangsu Hoperun. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Wantai Biological is 2.01 times less risky than Jiangsu Hoperun. The stock trades about -0.04 of its potential returns per unit of risk. The Jiangsu Hoperun Software is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,004  in Jiangsu Hoperun Software on November 28, 2024 and sell it today you would earn a total of  50.00  from holding Jiangsu Hoperun Software or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Beijing Wantai Biological  vs.  Jiangsu Hoperun Software

Beijing Wantai Biological

Risk-Adjusted Performance

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 somewhat strong basic indicators, Beijing Wantai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangsu Hoperun Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Hoperun Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangsu Hoperun 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 Jiangsu Hoperun

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

The idea behind Beijing Wantai Biological and Jiangsu Hoperun Software 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.