Correlation Between Jinhui Liquor and Beijing Roborock

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

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

Diversification Opportunities for Jinhui Liquor and Beijing Roborock

-0.6

Correlation Coefficient

Jinhui Liquor  Beijing Roborock

Excellent diversification

The 3 months correlation between Jinhui and Beijing is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and Beijing Roborock Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Roborock Tec and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with Beijing Roborock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Roborock Tec has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and Beijing Roborock go up and down completely randomly.

Pair Corralation between Jinhui Liquor and Beijing Roborock

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to under-perform the Beijing Roborock. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Liquor Co is 1.64 times less risky than Beijing Roborock. The stock trades about -0.12 of its potential returns per unit of risk. The Beijing Roborock Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  20,550  in Beijing Roborock Technology on November 28, 2024 and sell it today you would earn a total of  5,472  from holding Beijing Roborock Technology or generate 26.63% return on investment over 90 days.

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

Jinhui Liquor Co  vs.  Beijing Roborock Technology

Jinhui Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinhui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Beijing Roborock Tec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Roborock Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Roborock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinhui Liquor and Beijing Roborock

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

The idea behind Jinhui Liquor Co and Beijing Roborock Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.