Correlation Between Beijing YanDong and Jiangsu Cai

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

Diversification Opportunities for Beijing YanDong and Jiangsu Cai

0.41

Correlation Coefficient

Beijing YanDong  Jiangsu Cai

Very weak diversification

The 3 months correlation between Beijing and Jiangsu is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Beijing YanDong MicroElectroni and Jiangsu Cai Qin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Cai Qin 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 Jiangsu Cai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Cai Qin has no effect on the direction of Beijing YanDong i.e., Beijing YanDong and Jiangsu Cai go up and down completely randomly.

Pair Corralation between Beijing YanDong and Jiangsu Cai

Assuming the 90 days trading horizon Beijing YanDong MicroElectronic is expected to under-perform the Jiangsu Cai. But the stock apears to be less risky and, when comparing its historical volatility, Beijing YanDong MicroElectronic is 1.22 times less risky than Jiangsu Cai. The stock trades about -0.02 of its potential returns per unit of risk. The Jiangsu Cai Qin is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,869  in Jiangsu Cai Qin on December 26, 2024 and sell it today you would earn a total of  871.00  from holding Jiangsu Cai Qin or generate 46.6% return on investment over 90 days.

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

Beijing YanDong MicroElectroni  vs.  Jiangsu Cai Qin

Beijing YanDong Micr

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing YanDong MicroElectronic has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Jiangsu Cai Qin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Cai Qin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Cai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing YanDong and Jiangsu Cai

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

The idea behind Beijing YanDong MicroElectronic and Jiangsu Cai Qin 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.