Correlation Between Beijing Roborock and China Everbright

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

Diversification Opportunities for Beijing Roborock and China Everbright

-0.46

Correlation Coefficient

Beijing Roborock  China Everbright

Very good diversification

The 3 months correlation between Beijing and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank 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 Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and China Everbright go up and down completely randomly.

Pair Corralation between Beijing Roborock and China Everbright

Assuming the 90 days trading horizon Beijing Roborock Technology is expected to generate 2.65 times more return on investment than China Everbright. However, Beijing Roborock is 2.65 times more volatile than China Everbright Bank. It trades about 0.03 of its potential returns per unit of risk. China Everbright Bank is currently generating about 0.05 per unit of risk. If you would invest  21,349  in Beijing Roborock Technology on October 11, 2024 and sell it today you would earn a total of  2,742  from holding Beijing Roborock Technology or generate 12.84% return on investment over 90 days.

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

Beijing Roborock Technology  vs.  China Everbright Bank

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 somewhat strong basic indicators, Beijing Roborock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Everbright Bank

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Everbright may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Beijing Roborock and China Everbright

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

The idea behind Beijing Roborock Technology and China Everbright Bank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.