Correlation Between Renrenle Commercial and Beijing Wandong

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

By analyzing existing cross correlation between Renrenle Commercial Group and Beijing Wandong Medical, you can compare the effects of market volatilities on Renrenle Commercial and Beijing Wandong 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 Renrenle Commercial with a short position of Beijing Wandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renrenle Commercial and Beijing Wandong.

Diversification Opportunities for Renrenle Commercial and Beijing Wandong

0.72

Correlation Coefficient

Renrenle Commercial  Beijing Wandong

Poor diversification

The 3 months correlation between Renrenle and Beijing is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Renrenle Commercial Group and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong Medical and Renrenle Commercial 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 Renrenle Commercial Group are associated (or correlated) with Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of Renrenle Commercial i.e., Renrenle Commercial and Beijing Wandong go up and down completely randomly.

Pair Corralation between Renrenle Commercial and Beijing Wandong

Assuming the 90 days trading horizon Renrenle Commercial Group is expected to generate 2.15 times more return on investment than Beijing Wandong. However, Renrenle Commercial is 2.15 times more volatile than Beijing Wandong Medical. It trades about 0.49 of its potential returns per unit of risk. Beijing Wandong Medical is currently generating about -0.27 per unit of risk. If you would invest  466.00  in Renrenle Commercial Group on September 30, 2024 and sell it today you would earn a total of  199.00  from holding Renrenle Commercial Group or generate 42.7% return on investment over 90 days.

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

Renrenle Commercial Group  vs.  Beijing Wandong Medical

Renrenle Commercial

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Renrenle Commercial Group are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renrenle Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Wandong Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wandong Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Wandong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Renrenle Commercial and Beijing Wandong

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

The idea behind Renrenle Commercial Group and Beijing Wandong Medical 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..