Correlation Between Zhuhai Comleader and Beijing Wantai

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

By analyzing existing cross correlation between Zhuhai Comleader Information and Beijing Wantai Biological, you can compare the effects of market volatilities on Zhuhai Comleader and Beijing Wantai 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 Zhuhai Comleader with a short position of Beijing Wantai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhuhai Comleader and Beijing Wantai.

Diversification Opportunities for Zhuhai Comleader and Beijing Wantai

0.36

Correlation Coefficient

Zhuhai Comleader  Beijing Wantai

Weak diversification

The 3 months correlation between Zhuhai and Beijing is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhuhai Comleader Information and Beijing Wantai Biological in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wantai Biological and Zhuhai Comleader 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 Zhuhai Comleader Information are associated (or correlated) with Beijing Wantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wantai Biological has no effect on the direction of Zhuhai Comleader i.e., Zhuhai Comleader and Beijing Wantai go up and down completely randomly.

Pair Corralation between Zhuhai Comleader and Beijing Wantai

Assuming the 90 days trading horizon Zhuhai Comleader Information is expected to generate 2.1 times more return on investment than Beijing Wantai. However, Zhuhai Comleader is 2.1 times more volatile than Beijing Wantai Biological. It trades about 0.02 of its potential returns per unit of risk. Beijing Wantai Biological is currently generating about -0.16 per unit of risk. If you would invest  1,680  in Zhuhai Comleader Information on October 5, 2024 and sell it today you would earn a total of  16.00  from holding Zhuhai Comleader Information or generate 0.95% return on investment over 90 days.

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

Zhuhai Comleader Information  vs.  Beijing Wantai Biological

Zhuhai Comleader Inf

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhuhai Comleader Information are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhuhai Comleader may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Beijing Wantai Biological

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Wantai Biological 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.

Pair Trading with Zhuhai Comleader and Beijing Wantai

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

The idea behind Zhuhai Comleader Information and Beijing Wantai Biological 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.