Correlation Between Shanghai Oriental and Beijing Bewinner

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

By analyzing existing cross correlation between Shanghai Oriental Pearl and Beijing Bewinner Communications, you can compare the effects of market volatilities on Shanghai Oriental and Beijing Bewinner 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 Shanghai Oriental with a short position of Beijing Bewinner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Oriental and Beijing Bewinner.

Diversification Opportunities for Shanghai Oriental and Beijing Bewinner

0.7

Correlation Coefficient

Shanghai Oriental  Beijing Bewinner

Poor diversification

The 3 months correlation between Shanghai and Beijing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Oriental Pearl and Beijing Bewinner Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Bewinner Com and Shanghai Oriental 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 Shanghai Oriental Pearl are associated (or correlated) with Beijing Bewinner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Bewinner Com has no effect on the direction of Shanghai Oriental i.e., Shanghai Oriental and Beijing Bewinner go up and down completely randomly.

Pair Corralation between Shanghai Oriental and Beijing Bewinner

Assuming the 90 days trading horizon Shanghai Oriental is expected to generate 3.2 times less return on investment than Beijing Bewinner. But when comparing it to its historical volatility, Shanghai Oriental Pearl is 1.72 times less risky than Beijing Bewinner. It trades about 0.05 of its potential returns per unit of risk. Beijing Bewinner Communications is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Beijing Bewinner Communications on September 28, 2024 and sell it today you would earn a total of  101.00  from holding Beijing Bewinner Communications or generate 17.97% return on investment over 90 days.

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

Shanghai Oriental Pearl  vs.  Beijing Bewinner Communication

Shanghai Oriental Pearl

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Oriental Pearl are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beijing Bewinner Com

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Bewinner Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Bewinner sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Oriental and Beijing Bewinner

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

The idea behind Shanghai Oriental Pearl and Beijing Bewinner Communications 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.