Correlation Between Biwin Storage and Guangzhou Dongfang

Can any of the company-specific risk be diversified away by investing in both Biwin Storage and Guangzhou Dongfang 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 Biwin Storage and Guangzhou Dongfang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biwin Storage Technology and Guangzhou Dongfang Hotel, you can compare the effects of market volatilities on Biwin Storage and Guangzhou Dongfang 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 Biwin Storage with a short position of Guangzhou Dongfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biwin Storage and Guangzhou Dongfang.

Diversification Opportunities for Biwin Storage and Guangzhou Dongfang

0.02

Correlation Coefficient

Biwin Storage  Guangzhou Dongfang

Significant diversification

The 3 months correlation between Biwin and Guangzhou is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Biwin Storage Technology and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Biwin Storage 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 Biwin Storage Technology are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Biwin Storage i.e., Biwin Storage and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Biwin Storage and Guangzhou Dongfang

Assuming the 90 days trading horizon Biwin Storage Technology is expected to generate 1.5 times more return on investment than Guangzhou Dongfang. However, Biwin Storage is 1.5 times more volatile than Guangzhou Dongfang Hotel. It trades about 0.13 of its potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about -0.06 per unit of risk. If you would invest  5,973  in Biwin Storage Technology on December 2, 2024 and sell it today you would earn a total of  1,533  from holding Biwin Storage Technology or generate 25.67% return on investment over 90 days.

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

Biwin Storage Technology  vs.  Guangzhou Dongfang Hotel

Biwin Storage Technology

Risk-Adjusted Performance

OK

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

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Dongfang Hotel 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 Biwin Storage and Guangzhou Dongfang

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

The idea behind Biwin Storage Technology and Guangzhou Dongfang Hotel 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.