Correlation Between Zhongyin Babi and Beijing Shunxin

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

By analyzing existing cross correlation between Zhongyin Babi Food and Beijing Shunxin Agriculture, you can compare the effects of market volatilities on Zhongyin Babi and Beijing Shunxin 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 Zhongyin Babi with a short position of Beijing Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongyin Babi and Beijing Shunxin.

Diversification Opportunities for Zhongyin Babi and Beijing Shunxin

0.86

Correlation Coefficient

Zhongyin Babi  Beijing Shunxin

Very poor diversification

The 3 months correlation between Zhongyin and Beijing is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Zhongyin Babi Food and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri and Zhongyin Babi 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 Zhongyin Babi Food are associated (or correlated) with Beijing Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Zhongyin Babi i.e., Zhongyin Babi and Beijing Shunxin go up and down completely randomly.

Pair Corralation between Zhongyin Babi and Beijing Shunxin

Assuming the 90 days trading horizon Zhongyin Babi Food is expected to generate 1.56 times more return on investment than Beijing Shunxin. However, Zhongyin Babi is 1.56 times more volatile than Beijing Shunxin Agriculture. It trades about 0.2 of its potential returns per unit of risk. Beijing Shunxin Agriculture is currently generating about 0.11 per unit of risk. If you would invest  1,622  in Zhongyin Babi Food on September 19, 2024 and sell it today you would earn a total of  256.00  from holding Zhongyin Babi Food or generate 15.78% return on investment over 90 days.

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

Zhongyin Babi Food  vs.  Beijing Shunxin Agriculture

Zhongyin Babi Food

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongyin Babi sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Shunxin Agri

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Shunxin Agriculture are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Shunxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongyin Babi and Beijing Shunxin

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

The idea behind Zhongyin Babi Food and Beijing Shunxin Agriculture 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.