Correlation Between Beijing Mainstreets and Hangzhou Gisway

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

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

Diversification Opportunities for Beijing Mainstreets and Hangzhou Gisway

0.42

Correlation Coefficient

Beijing Mainstreets  Hangzhou Gisway

Very weak diversification

The 3 months correlation between Beijing and Hangzhou is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Mainstreets Investment and Hangzhou Gisway Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Gisway Info and Beijing Mainstreets 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 Mainstreets Investment are associated (or correlated) with Hangzhou Gisway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Gisway Info has no effect on the direction of Beijing Mainstreets i.e., Beijing Mainstreets and Hangzhou Gisway go up and down completely randomly.

Pair Corralation between Beijing Mainstreets and Hangzhou Gisway

Assuming the 90 days trading horizon Beijing Mainstreets Investment is expected to under-perform the Hangzhou Gisway. But the stock apears to be less risky and, when comparing its historical volatility, Beijing Mainstreets Investment is 1.56 times less risky than Hangzhou Gisway. The stock trades about -0.09 of its potential returns per unit of risk. The Hangzhou Gisway Information is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,160  in Hangzhou Gisway Information on September 28, 2024 and sell it today you would earn a total of  401.00  from holding Hangzhou Gisway Information or generate 12.69% return on investment over 90 days.

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

Beijing Mainstreets Investment  vs.  Hangzhou Gisway Information

Beijing Mainstreets

Risk-Adjusted Performance

2 of 100

Weak

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

Hangzhou Gisway Info

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Gisway Information are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Gisway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Mainstreets and Hangzhou Gisway

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

The idea behind Beijing Mainstreets Investment and Hangzhou Gisway 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.