Correlation Between JuneYao Dairy and Beijing Compass

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

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

Diversification Opportunities for JuneYao Dairy and Beijing Compass

0.39

Correlation Coefficient

JuneYao Dairy  Beijing Compass

Weak diversification

The 3 months correlation between JuneYao and Beijing is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding JuneYao Dairy Co and Beijing Compass Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Compass Tech and JuneYao Dairy 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 JuneYao Dairy Co are associated (or correlated) with Beijing Compass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Compass Tech has no effect on the direction of JuneYao Dairy i.e., JuneYao Dairy and Beijing Compass go up and down completely randomly.

Pair Corralation between JuneYao Dairy and Beijing Compass

Assuming the 90 days trading horizon JuneYao Dairy Co is expected to under-perform the Beijing Compass. In addition to that, JuneYao Dairy is 1.15 times more volatile than Beijing Compass Technology. It trades about -0.18 of its total potential returns per unit of risk. Beijing Compass Technology is currently generating about -0.2 per unit of volatility. If you would invest  10,340  in Beijing Compass Technology on October 10, 2024 and sell it today you would lose (1,643) from holding Beijing Compass Technology or give up 15.89% of portfolio value over 90 days.

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

JuneYao Dairy Co  vs.  Beijing Compass Technology

JuneYao Dairy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JuneYao Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Compass Tech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Compass Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Compass sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JuneYao Dairy and Beijing Compass

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

The idea behind JuneYao Dairy Co and Beijing Compass 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .