Correlation Between Beijing Wantai and Lootom Telcovideo

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

Diversification Opportunities for Beijing Wantai and Lootom Telcovideo

0.14

Correlation Coefficient

Beijing Wantai  Lootom Telcovideo

Average diversification

The 3 months correlation between Beijing and Lootom is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wantai Biological and Lootom Telcovideo Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lootom Telcovideo Network 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 Lootom Telcovideo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lootom Telcovideo Network has no effect on the direction of Beijing Wantai i.e., Beijing Wantai and Lootom Telcovideo go up and down completely randomly.

Pair Corralation between Beijing Wantai and Lootom Telcovideo

Assuming the 90 days trading horizon Beijing Wantai Biological is expected to generate 1.01 times more return on investment than Lootom Telcovideo. However, Beijing Wantai is 1.01 times more volatile than Lootom Telcovideo Network. It trades about 0.06 of its potential returns per unit of risk. Lootom Telcovideo Network is currently generating about 0.04 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beijing Wantai Biological  vs.  Lootom Telcovideo Network

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.

Lootom Telcovideo Network

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lootom Telcovideo Network are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lootom Telcovideo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Wantai and Lootom Telcovideo

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

The idea behind Beijing Wantai Biological and Lootom Telcovideo Network 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.