Correlation Between Cabio Biotech and Beijing Seeyon

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

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

Diversification Opportunities for Cabio Biotech and Beijing Seeyon

0.89

Correlation Coefficient

Cabio Biotech  Beijing Seeyon

Very poor diversification

The 3 months correlation between Cabio and Beijing is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cabio Biotech Wuhan and Beijing Seeyon Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Seeyon Internet and Cabio Biotech 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 Cabio Biotech Wuhan are associated (or correlated) with Beijing Seeyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Seeyon Internet has no effect on the direction of Cabio Biotech i.e., Cabio Biotech and Beijing Seeyon go up and down completely randomly.

Pair Corralation between Cabio Biotech and Beijing Seeyon

Assuming the 90 days trading horizon Cabio Biotech is expected to generate 2.03 times less return on investment than Beijing Seeyon. But when comparing it to its historical volatility, Cabio Biotech Wuhan is 1.41 times less risky than Beijing Seeyon. It trades about 0.12 of its potential returns per unit of risk. Beijing Seeyon Internet is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,122  in Beijing Seeyon Internet on December 25, 2024 and sell it today you would earn a total of  1,317  from holding Beijing Seeyon Internet or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Cabio Biotech Wuhan  vs.  Beijing Seeyon Internet

Cabio Biotech Wuhan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cabio Biotech Wuhan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cabio Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Seeyon Internet

Risk-Adjusted Performance

Good

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

Pair Trading with Cabio Biotech and Beijing Seeyon

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

The idea behind Cabio Biotech Wuhan and Beijing Seeyon Internet 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.