Correlation Between Beijing Tong and Alibaba Health

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

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

Diversification Opportunities for Beijing Tong and Alibaba Health

0.9

Correlation Coefficient

Beijing Tong  Alibaba Health

Almost no diversification

The 3 months correlation between Beijing and Alibaba is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Tong Ren and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor and Beijing Tong 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 Tong Ren are associated (or correlated) with Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Beijing Tong i.e., Beijing Tong and Alibaba Health go up and down completely randomly.

Pair Corralation between Beijing Tong and Alibaba Health

Assuming the 90 days horizon Beijing Tong Ren is expected to generate 0.82 times more return on investment than Alibaba Health. However, Beijing Tong Ren is 1.22 times less risky than Alibaba Health. It trades about 0.05 of its potential returns per unit of risk. Alibaba Health Information is currently generating about -0.01 per unit of risk. If you would invest  53.00  in Beijing Tong Ren on September 12, 2024 and sell it today you would earn a total of  45.00  from holding Beijing Tong Ren or generate 84.91% return on investment over 90 days.

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

Beijing Tong Ren  vs.  Alibaba Health Information

Beijing Tong Ren

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Tong Ren are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Beijing Tong reported solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Health Infor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Health Information are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alibaba Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Tong and Alibaba Health

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

The idea behind Beijing Tong Ren and Alibaba Health Information 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.