Correlation Between Beijing Wantai and Kingclean Electric

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

Diversification Opportunities for Beijing Wantai and Kingclean Electric

-0.18

Correlation Coefficient

Beijing Wantai  Kingclean Electric

Good diversification

The 3 months correlation between Beijing and Kingclean is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Wantai Biological and Kingclean Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingclean Electric 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 Kingclean Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingclean Electric has no effect on the direction of Beijing Wantai i.e., Beijing Wantai and Kingclean Electric go up and down completely randomly.

Pair Corralation between Beijing Wantai and Kingclean Electric

Assuming the 90 days trading horizon Beijing Wantai Biological is expected to under-perform the Kingclean Electric. In addition to that, Beijing Wantai is 1.04 times more volatile than Kingclean Electric Co. It trades about -0.12 of its total potential returns per unit of risk. Kingclean Electric Co is currently generating about 0.08 per unit of volatility. If you would invest  2,297  in Kingclean Electric Co on December 4, 2024 and sell it today you would earn a total of  186.00  from holding Kingclean Electric Co or generate 8.1% return on investment over 90 days.

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

Beijing Wantai Biological  vs.  Kingclean Electric Co

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kingclean Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingclean Electric Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kingclean Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Beijing Wantai and Kingclean Electric

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

The idea behind Beijing Wantai Biological and Kingclean Electric 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.