Correlation Between Beijing Roborock and China Union

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

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

Diversification Opportunities for Beijing Roborock and China Union

-0.37

Correlation Coefficient

Beijing Roborock  China Union

Very good diversification

The 3 months correlation between Beijing and China is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and China Union Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Union Holdings and Beijing Roborock 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 Roborock Technology are associated (or correlated) with China Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Union Holdings has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and China Union go up and down completely randomly.

Pair Corralation between Beijing Roborock and China Union

Assuming the 90 days trading horizon Beijing Roborock Technology is expected to under-perform the China Union. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Roborock Technology is 1.24 times less risky than China Union. The stock trades about -0.09 of its potential returns per unit of risk. The China Union Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  468.00  in China Union Holdings on October 26, 2024 and sell it today you would lose (57.00) from holding China Union Holdings or give up 12.18% of portfolio value over 90 days.

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

Beijing Roborock Technology  vs.  China Union Holdings

Beijing Roborock Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Roborock Technology 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.

China Union Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Union Holdings 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.

Pair Trading with Beijing Roborock and China Union

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

The idea behind Beijing Roborock Technology and China Union Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.