Correlation Between Beijing Kaiwen and China Nonferrous

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

By analyzing existing cross correlation between Beijing Kaiwen Education and China Nonferrous Metal, you can compare the effects of market volatilities on Beijing Kaiwen and China Nonferrous 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 Kaiwen with a short position of China Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kaiwen and China Nonferrous.

Diversification Opportunities for Beijing Kaiwen and China Nonferrous

0.88

Correlation Coefficient

Beijing Kaiwen  China Nonferrous

Very poor diversification

The 3 months correlation between Beijing and China is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kaiwen Education and China Nonferrous Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Nonferrous Metal and Beijing Kaiwen 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 Kaiwen Education are associated (or correlated) with China Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Nonferrous Metal has no effect on the direction of Beijing Kaiwen i.e., Beijing Kaiwen and China Nonferrous go up and down completely randomly.

Pair Corralation between Beijing Kaiwen and China Nonferrous

Assuming the 90 days trading horizon Beijing Kaiwen Education is expected to generate 1.41 times more return on investment than China Nonferrous. However, Beijing Kaiwen is 1.41 times more volatile than China Nonferrous Metal. It trades about 0.2 of its potential returns per unit of risk. China Nonferrous Metal is currently generating about 0.17 per unit of risk. If you would invest  375.00  in Beijing Kaiwen Education on September 16, 2024 and sell it today you would earn a total of  202.00  from holding Beijing Kaiwen Education or generate 53.87% return on investment over 90 days.

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

Beijing Kaiwen Education  vs.  China Nonferrous Metal

Beijing Kaiwen Education

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kaiwen Education are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kaiwen sustained solid returns over the last few months and may actually be approaching a breakup point.

China Nonferrous Metal

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Nonferrous Metal are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Kaiwen and China Nonferrous

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

The idea behind Beijing Kaiwen Education and China Nonferrous Metal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.