Correlation Between Beijing Kingsoft and Hefei Metalforming

Can any of the company-specific risk be diversified away by investing in both Beijing Kingsoft and Hefei Metalforming 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 Hefei Metalforming 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 Hefei Metalforming Mach, you can compare the effects of market volatilities on Beijing Kingsoft and Hefei Metalforming 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 Hefei Metalforming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kingsoft and Hefei Metalforming.

Diversification Opportunities for Beijing Kingsoft and Hefei Metalforming

0.72

Correlation Coefficient

Beijing Kingsoft  Hefei Metalforming

Poor diversification

The 3 months correlation between Beijing and Hefei is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kingsoft Office and Hefei Metalforming Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hefei Metalforming Mach 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 Hefei Metalforming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hefei Metalforming Mach has no effect on the direction of Beijing Kingsoft i.e., Beijing Kingsoft and Hefei Metalforming go up and down completely randomly.

Pair Corralation between Beijing Kingsoft and Hefei Metalforming

Assuming the 90 days trading horizon Beijing Kingsoft Office is expected to under-perform the Hefei Metalforming. In addition to that, Beijing Kingsoft is 1.01 times more volatile than Hefei Metalforming Mach. It trades about -0.02 of its total potential returns per unit of risk. Hefei Metalforming Mach is currently generating about 0.01 per unit of volatility. If you would invest  677.00  in Hefei Metalforming Mach on October 5, 2024 and sell it today you would lose (34.00) from holding Hefei Metalforming Mach or give up 5.02% of portfolio value over 90 days.

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

Beijing Kingsoft Office  vs.  Hefei Metalforming Mach

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hefei Metalforming Mach

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hefei Metalforming Mach has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hefei Metalforming 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 Hefei Metalforming

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

The idea behind Beijing Kingsoft Office and Hefei Metalforming Mach 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.