Correlation Between Beijing Roborock and Dazhong Transportation

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

Diversification Opportunities for Beijing Roborock and Dazhong Transportation

0.31

Correlation Coefficient

Beijing Roborock  Dazhong Transportation

Weak diversification

The 3 months correlation between Beijing and Dazhong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation 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 Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Beijing Roborock and Dazhong Transportation

Assuming the 90 days trading horizon Beijing Roborock Technology is expected to generate 1.44 times more return on investment than Dazhong Transportation. However, Beijing Roborock is 1.44 times more volatile than Dazhong Transportation Group. It trades about 0.13 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about 0.01 per unit of risk. If you would invest  21,000  in Beijing Roborock Technology on December 26, 2024 and sell it today you would earn a total of  4,122  from holding Beijing Roborock Technology or generate 19.63% return on investment over 90 days.

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

Beijing Roborock Technology  vs.  Dazhong Transportation Group

Beijing Roborock Tec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Roborock Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Roborock sustained solid returns over the last few months and may actually be approaching a breakup point.

Dazhong Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dazhong Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dazhong Transportation 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 Roborock and Dazhong Transportation

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

The idea behind Beijing Roborock Technology and Dazhong Transportation Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.