Correlation Between Beijing Enterprises and Arca Continental

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

By analyzing existing cross correlation between Beijing Enterprises Holdings and Arca Continental SAB, you can compare the effects of market volatilities on Beijing Enterprises and Arca Continental 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 Enterprises with a short position of Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Enterprises and Arca Continental.

Diversification Opportunities for Beijing Enterprises and Arca Continental

0.01

Correlation Coefficient

Beijing Enterprises  Arca Continental

Significant diversification

The 3 months correlation between Beijing and Arca is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Enterprises Holdings and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and Beijing Enterprises 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 Enterprises Holdings are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Beijing Enterprises i.e., Beijing Enterprises and Arca Continental go up and down completely randomly.

Pair Corralation between Beijing Enterprises and Arca Continental

Assuming the 90 days horizon Beijing Enterprises is expected to generate 3.79 times less return on investment than Arca Continental. But when comparing it to its historical volatility, Beijing Enterprises Holdings is 1.7 times less risky than Arca Continental. It trades about 0.04 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  840.00  in Arca Continental SAB on September 20, 2024 and sell it today you would earn a total of  42.00  from holding Arca Continental SAB or generate 5.0% return on investment over 90 days.

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

Beijing Enterprises Holdings  vs.  Arca Continental SAB

Beijing Enterprises

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enterprises Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Beijing Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Beijing Enterprises and Arca Continental

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

The idea behind Beijing Enterprises Holdings and Arca Continental SAB 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.