Correlation Between Beijing MediaLimited and CHINA EDUCATION

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

By analyzing existing cross correlation between Beijing Media and CHINA EDUCATION GROUP, you can compare the effects of market volatilities on Beijing MediaLimited and CHINA EDUCATION 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 MediaLimited with a short position of CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing MediaLimited and CHINA EDUCATION.

Diversification Opportunities for Beijing MediaLimited and CHINA EDUCATION

0.4

Correlation Coefficient

Beijing MediaLimited  CHINA EDUCATION

Very weak diversification

The 3 months correlation between Beijing and CHINA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Media and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP and Beijing MediaLimited 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 Media are associated (or correlated) with CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Beijing MediaLimited i.e., Beijing MediaLimited and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between Beijing MediaLimited and CHINA EDUCATION

Assuming the 90 days horizon Beijing Media is expected to generate 0.77 times more return on investment than CHINA EDUCATION. However, Beijing Media is 1.3 times less risky than CHINA EDUCATION. It trades about 0.0 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about -0.03 per unit of risk. If you would invest  3.35  in Beijing Media on September 2, 2024 and sell it today you would lose (0.15) from holding Beijing Media or give up 4.48% of portfolio value over 90 days.

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

Beijing Media  vs.  CHINA EDUCATION GROUP

Beijing MediaLimited

Risk-Adjusted Performance

0 of 100

Very Weak

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

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Beijing MediaLimited and CHINA EDUCATION

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

The idea behind Beijing Media and CHINA EDUCATION GROUP 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.