Correlation Between Beijing Originwater and Fiberhome Telecommunicatio

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

By analyzing existing cross correlation between Beijing Originwater Technology and Fiberhome Telecommunication Technologies, you can compare the effects of market volatilities on Beijing Originwater and Fiberhome Telecommunicatio 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 Originwater with a short position of Fiberhome Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Originwater and Fiberhome Telecommunicatio.

Diversification Opportunities for Beijing Originwater and Fiberhome Telecommunicatio

0.93

Correlation Coefficient

Beijing Originwater  Fiberhome Telecommunicatio

Almost no diversification

The 3 months correlation between Beijing and Fiberhome is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Originwater Technology and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio and Beijing Originwater 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 Originwater Technology are associated (or correlated) with Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Beijing Originwater i.e., Beijing Originwater and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Beijing Originwater and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Beijing Originwater Technology is expected to generate 1.24 times more return on investment than Fiberhome Telecommunicatio. However, Beijing Originwater is 1.24 times more volatile than Fiberhome Telecommunication Technologies. It trades about -0.08 of its potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about -0.19 per unit of risk. If you would invest  619.00  in Beijing Originwater Technology on September 13, 2024 and sell it today you would lose (28.00) from holding Beijing Originwater Technology or give up 4.52% of portfolio value over 90 days.

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

Beijing Originwater Technology  vs.  Fiberhome Telecommunication Te

Beijing Originwater

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Originwater Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Originwater sustained solid returns over the last few months and may actually be approaching a breakup point.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Originwater and Fiberhome Telecommunicatio

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

The idea behind Beijing Originwater Technology and Fiberhome Telecommunication Technologies 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.