Correlation Between Beijing Enterprises and Anhui Conch

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

By analyzing existing cross correlation between Beijing Enterprises Water and Anhui Conch Cement, you can compare the effects of market volatilities on Beijing Enterprises and Anhui Conch 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 Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Enterprises and Anhui Conch.

Diversification Opportunities for Beijing Enterprises and Anhui Conch

-0.21

Correlation Coefficient

Beijing Enterprises  Anhui Conch

Very good diversification

The 3 months correlation between Beijing and Anhui is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Enterprises Water and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement 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 Water are associated (or correlated) with Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of Beijing Enterprises i.e., Beijing Enterprises and Anhui Conch go up and down completely randomly.

Pair Corralation between Beijing Enterprises and Anhui Conch

Assuming the 90 days horizon Beijing Enterprises Water is expected to under-perform the Anhui Conch. But the pink sheet apears to be less risky and, when comparing its historical volatility, Beijing Enterprises Water is 1.01 times less risky than Anhui Conch. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Anhui Conch Cement is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,258  in Anhui Conch Cement on December 29, 2024 and sell it today you would earn a total of  169.00  from holding Anhui Conch Cement or generate 13.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Beijing Enterprises Water  vs.  Anhui Conch Cement

Beijing Enterprises Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Enterprises Water has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Anhui Conch Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Enterprises and Anhui Conch

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

The idea behind Beijing Enterprises Water and Anhui Conch Cement 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .