Correlation Between Beijing Kingsoft and Fuda Alloy

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

Diversification Opportunities for Beijing Kingsoft and Fuda Alloy

0.65

Correlation Coefficient

Beijing Kingsoft  Fuda Alloy

Poor diversification

The 3 months correlation between Beijing and Fuda is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kingsoft Office and Fuda Alloy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuda Alloy Materials 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 Fuda Alloy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuda Alloy Materials has no effect on the direction of Beijing Kingsoft i.e., Beijing Kingsoft and Fuda Alloy go up and down completely randomly.

Pair Corralation between Beijing Kingsoft and Fuda Alloy

Assuming the 90 days trading horizon Beijing Kingsoft Office is expected to generate 1.5 times more return on investment than Fuda Alloy. However, Beijing Kingsoft is 1.5 times more volatile than Fuda Alloy Materials. It trades about 0.0 of its potential returns per unit of risk. Fuda Alloy Materials is currently generating about -0.04 per unit of risk. If you would invest  26,998  in Beijing Kingsoft Office on October 7, 2024 and sell it today you would lose (830.00) from holding Beijing Kingsoft Office or give up 3.07% 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.  Fuda Alloy Materials

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.

Fuda Alloy Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuda Alloy Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fuda Alloy 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 Fuda Alloy

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

The idea behind Beijing Kingsoft Office and Fuda Alloy Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.