Correlation Between Chahua Modern and Beijing Enlight

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

By analyzing existing cross correlation between Chahua Modern Housewares and Beijing Enlight Media, you can compare the effects of market volatilities on Chahua Modern and Beijing Enlight 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 Chahua Modern with a short position of Beijing Enlight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chahua Modern and Beijing Enlight.

Diversification Opportunities for Chahua Modern and Beijing Enlight

0.44

Correlation Coefficient

Chahua Modern  Beijing Enlight

Very weak diversification

The 3 months correlation between Chahua and Beijing is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and Beijing Enlight Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enlight Media and Chahua Modern 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 Chahua Modern Housewares are associated (or correlated) with Beijing Enlight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enlight Media has no effect on the direction of Chahua Modern i.e., Chahua Modern and Beijing Enlight go up and down completely randomly.

Pair Corralation between Chahua Modern and Beijing Enlight

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to generate 1.92 times more return on investment than Beijing Enlight. However, Chahua Modern is 1.92 times more volatile than Beijing Enlight Media. It trades about 0.07 of its potential returns per unit of risk. Beijing Enlight Media is currently generating about -0.25 per unit of risk. If you would invest  2,000  in Chahua Modern Housewares on October 11, 2024 and sell it today you would earn a total of  88.00  from holding Chahua Modern Housewares or generate 4.4% return on investment over 90 days.

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

Chahua Modern Housewares  vs.  Beijing Enlight Media

Chahua Modern Housewares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Enlight Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enlight Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Enlight may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chahua Modern and Beijing Enlight

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

The idea behind Chahua Modern Housewares and Beijing Enlight Media 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.