Correlation Between Beijing Baolande and Beijing Ultrapower

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

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

Diversification Opportunities for Beijing Baolande and Beijing Ultrapower

0.9

Correlation Coefficient

Beijing Baolande  Beijing Ultrapower

Almost no diversification

The 3 months correlation between Beijing and Beijing is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Baolande Software and Beijing Ultrapower Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Ultrapower and Beijing Baolande 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 Beijing Baolande Software are associated (or correlated) with Beijing Ultrapower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Ultrapower has no effect on the direction of Beijing Baolande i.e., Beijing Baolande and Beijing Ultrapower go up and down completely randomly.

Pair Corralation between Beijing Baolande and Beijing Ultrapower

Assuming the 90 days trading horizon Beijing Baolande is expected to generate 1.2 times less return on investment than Beijing Ultrapower. In addition to that, Beijing Baolande is 1.72 times more volatile than Beijing Ultrapower Software. It trades about 0.04 of its total potential returns per unit of risk. Beijing Ultrapower Software is currently generating about 0.08 per unit of volatility. If you would invest  1,202  in Beijing Ultrapower Software on December 27, 2024 and sell it today you would earn a total of  140.00  from holding Beijing Ultrapower Software or generate 11.65% return on investment over 90 days.

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

Beijing Baolande Software  vs.  Beijing Ultrapower Software

Beijing Baolande Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Baolande Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Baolande may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Beijing Ultrapower

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Ultrapower Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Ultrapower sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Baolande and Beijing Ultrapower

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

The idea behind Beijing Baolande Software and Beijing Ultrapower Software 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.