Correlation Between Eastroc Beverage and Xinjiang Baodi

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Xinjiang Baodi 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 Eastroc Beverage and Xinjiang Baodi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastroc Beverage Group and Xinjiang Baodi Mining, you can compare the effects of market volatilities on Eastroc Beverage and Xinjiang Baodi 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 Eastroc Beverage with a short position of Xinjiang Baodi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Xinjiang Baodi.

Diversification Opportunities for Eastroc Beverage and Xinjiang Baodi

0.69

Correlation Coefficient

Eastroc Beverage  Xinjiang Baodi

Poor diversification

The 3 months correlation between Eastroc and Xinjiang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi Mining and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Xinjiang Baodi

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 0.71 times more return on investment than Xinjiang Baodi. However, Eastroc Beverage Group is 1.41 times less risky than Xinjiang Baodi. It trades about 0.07 of its potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about 0.0 per unit of risk. If you would invest  14,557  in Eastroc Beverage Group on October 5, 2024 and sell it today you would earn a total of  10,083  from holding Eastroc Beverage Group or generate 69.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.77%
Values	Daily Returns

Eastroc Beverage Group  vs.  Xinjiang Baodi Mining

Eastroc Beverage

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinjiang Baodi Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinjiang Baodi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastroc Beverage and Xinjiang Baodi

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

The idea behind Eastroc Beverage Group and Xinjiang Baodi Mining 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.