Correlation Between National Silicon and Beijing Compass

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

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

Diversification Opportunities for National Silicon and Beijing Compass

0.91

Correlation Coefficient

National Silicon  Beijing Compass

Almost no diversification

The 3 months correlation between National and Beijing is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and Beijing Compass Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Compass Tech and National Silicon 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 National Silicon Industry are associated (or correlated) with Beijing Compass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Compass Tech has no effect on the direction of National Silicon i.e., National Silicon and Beijing Compass go up and down completely randomly.

Pair Corralation between National Silicon and Beijing Compass

Assuming the 90 days trading horizon National Silicon Industry is expected to under-perform the Beijing Compass. But the stock apears to be less risky and, when comparing its historical volatility, National Silicon Industry is 1.75 times less risky than Beijing Compass. The stock trades about -0.23 of its potential returns per unit of risk. The Beijing Compass Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,497  in Beijing Compass Technology on September 20, 2024 and sell it today you would lose (127.00) from holding Beijing Compass Technology or give up 1.34% of portfolio value over 90 days.

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

National Silicon Industry  vs.  Beijing Compass Technology

National Silicon Industry

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Silicon Industry are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Compass Tech

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Compass Technology are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Compass sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Silicon and Beijing Compass

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

The idea behind National Silicon Industry and Beijing Compass Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.