Correlation Between Beijing YanDong and Wuxi Dk

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

By analyzing existing cross correlation between Beijing YanDong MicroElectronic and Wuxi Dk Electronic, you can compare the effects of market volatilities on Beijing YanDong and Wuxi Dk 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 YanDong with a short position of Wuxi Dk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing YanDong and Wuxi Dk.

Diversification Opportunities for Beijing YanDong and Wuxi Dk

0.65

Correlation Coefficient

Beijing YanDong  Wuxi Dk

Poor diversification

The 3 months correlation between Beijing and Wuxi is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Beijing YanDong MicroElectroni and Wuxi Dk Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Dk Electronic and Beijing YanDong 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 YanDong MicroElectronic are associated (or correlated) with Wuxi Dk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Dk Electronic has no effect on the direction of Beijing YanDong i.e., Beijing YanDong and Wuxi Dk go up and down completely randomly.

Pair Corralation between Beijing YanDong and Wuxi Dk

Assuming the 90 days trading horizon Beijing YanDong MicroElectronic is expected to under-perform the Wuxi Dk. In addition to that, Beijing YanDong is 1.35 times more volatile than Wuxi Dk Electronic. It trades about -0.22 of its total potential returns per unit of risk. Wuxi Dk Electronic is currently generating about -0.16 per unit of volatility. If you would invest  4,364  in Wuxi Dk Electronic on October 25, 2024 and sell it today you would lose (261.00) from holding Wuxi Dk Electronic or give up 5.98% of portfolio value over 90 days.

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

Beijing YanDong MicroElectroni  vs.  Wuxi Dk Electronic

Beijing YanDong Micr

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing YanDong MicroElectronic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing YanDong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wuxi Dk Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuxi Dk Electronic 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 YanDong and Wuxi Dk

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

The idea behind Beijing YanDong MicroElectronic and Wuxi Dk Electronic 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.