Correlation Between Tieling Newcity and Beijing Sanyuan

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

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

Diversification Opportunities for Tieling Newcity and Beijing Sanyuan

0.86

Correlation Coefficient

Tieling Newcity  Beijing Sanyuan

Very poor diversification

The 3 months correlation between Tieling and Beijing is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tieling Newcity Investment and Beijing Sanyuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Sanyuan Foods and Tieling Newcity 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 Tieling Newcity Investment are associated (or correlated) with Beijing Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Sanyuan Foods has no effect on the direction of Tieling Newcity i.e., Tieling Newcity and Beijing Sanyuan go up and down completely randomly.

Pair Corralation between Tieling Newcity and Beijing Sanyuan

Assuming the 90 days trading horizon Tieling Newcity Investment is expected to generate 0.91 times more return on investment than Beijing Sanyuan. However, Tieling Newcity Investment is 1.1 times less risky than Beijing Sanyuan. It trades about 0.4 of its potential returns per unit of risk. Beijing Sanyuan Foods is currently generating about 0.31 per unit of risk. If you would invest  198.00  in Tieling Newcity Investment on September 15, 2024 and sell it today you would earn a total of  133.00  from holding Tieling Newcity Investment or generate 67.17% return on investment over 90 days.

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

Tieling Newcity Investment  vs.  Beijing Sanyuan Foods

Tieling Newcity Inve

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Sanyuan Foods

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Sanyuan Foods are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Sanyuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tieling Newcity and Beijing Sanyuan

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

The idea behind Tieling Newcity Investment and Beijing Sanyuan Foods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.