Correlation Between Bangyan Technology and Shanghai Action

Can any of the company-specific risk be diversified away by investing in both Bangyan Technology and Shanghai Action 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 Bangyan Technology and Shanghai Action into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bangyan Technology Co and Shanghai Action Education, you can compare the effects of market volatilities on Bangyan Technology and Shanghai Action 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 Bangyan Technology with a short position of Shanghai Action. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bangyan Technology and Shanghai Action.

Diversification Opportunities for Bangyan Technology and Shanghai Action

-0.05

Correlation Coefficient

Bangyan Technology  Shanghai Action

Good diversification

The 3 months correlation between Bangyan and Shanghai is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bangyan Technology Co and Shanghai Action Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Action Education and Bangyan Technology 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 Bangyan Technology Co are associated (or correlated) with Shanghai Action. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Action Education has no effect on the direction of Bangyan Technology i.e., Bangyan Technology and Shanghai Action go up and down completely randomly.

Pair Corralation between Bangyan Technology and Shanghai Action

Assuming the 90 days trading horizon Bangyan Technology Co is expected to under-perform the Shanghai Action. In addition to that, Bangyan Technology is 1.2 times more volatile than Shanghai Action Education. It trades about -0.3 of its total potential returns per unit of risk. Shanghai Action Education is currently generating about 0.06 per unit of volatility. If you would invest  3,653  in Shanghai Action Education on October 11, 2024 and sell it today you would earn a total of  90.00  from holding Shanghai Action Education or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bangyan Technology Co  vs.  Shanghai Action Education

Bangyan Technology

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bangyan Technology Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bangyan Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bangyan Technology and Shanghai Action

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

The idea behind Bangyan Technology Co and Shanghai Action Education 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.