Correlation Between Blue Sail and Beijing Wantai

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

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

Diversification Opportunities for Blue Sail and Beijing Wantai

0.67

Correlation Coefficient

Blue Sail  Beijing Wantai

Poor diversification

The 3 months correlation between Blue and Beijing is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Beijing Wantai Biological in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wantai Biological and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Beijing Wantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wantai Biological has no effect on the direction of Blue Sail i.e., Blue Sail and Beijing Wantai go up and down completely randomly.

Pair Corralation between Blue Sail and Beijing Wantai

Assuming the 90 days trading horizon Blue Sail Medical is expected to generate 1.07 times more return on investment than Beijing Wantai. However, Blue Sail is 1.07 times more volatile than Beijing Wantai Biological. It trades about 0.15 of its potential returns per unit of risk. Beijing Wantai Biological is currently generating about 0.04 per unit of risk. If you would invest  452.00  in Blue Sail Medical on September 3, 2024 and sell it today you would earn a total of  106.00  from holding Blue Sail Medical or generate 23.45% return on investment over 90 days.

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

Blue Sail Medical  vs.  Beijing Wantai Biological

Blue Sail Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Wantai Biological

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wantai Biological are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Wantai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blue Sail and Beijing Wantai

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

The idea behind Blue Sail Medical and Beijing Wantai Biological 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.