Correlation Between Beijing Kingsoft and Fujian Newland

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

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

Diversification Opportunities for Beijing Kingsoft and Fujian Newland

0.83

Correlation Coefficient

Beijing Kingsoft  Fujian Newland

Very poor diversification

The 3 months correlation between Beijing and Fujian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kingsoft Office and Fujian Newland Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Newland Computer and Beijing Kingsoft 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 Kingsoft Office are associated (or correlated) with Fujian Newland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Newland Computer has no effect on the direction of Beijing Kingsoft i.e., Beijing Kingsoft and Fujian Newland go up and down completely randomly.

Pair Corralation between Beijing Kingsoft and Fujian Newland

Assuming the 90 days trading horizon Beijing Kingsoft Office is expected to under-perform the Fujian Newland. In addition to that, Beijing Kingsoft is 1.22 times more volatile than Fujian Newland Computer. It trades about -0.05 of its total potential returns per unit of risk. Fujian Newland Computer is currently generating about 0.01 per unit of volatility. If you would invest  1,811  in Fujian Newland Computer on October 8, 2024 and sell it today you would lose (24.00) from holding Fujian Newland Computer or give up 1.33% of portfolio value over 90 days.

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

Beijing Kingsoft Office  vs.  Fujian Newland Computer

Beijing Kingsoft Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Kingsoft Office has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fujian Newland Computer

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fujian Newland Computer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fujian Newland is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beijing Kingsoft and Fujian Newland

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

The idea behind Beijing Kingsoft Office and Fujian Newland Computer 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.