Correlation Between AVIC Heavy and Beijing Mainstreets

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

By analyzing existing cross correlation between AVIC Heavy Machinery and Beijing Mainstreets Investment, you can compare the effects of market volatilities on AVIC Heavy and Beijing Mainstreets 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 AVIC Heavy with a short position of Beijing Mainstreets. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVIC Heavy and Beijing Mainstreets.

Diversification Opportunities for AVIC Heavy and Beijing Mainstreets

0.56

Correlation Coefficient

AVIC Heavy  Beijing Mainstreets

Very weak diversification

The 3 months correlation between AVIC and Beijing is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding AVIC Heavy Machinery and Beijing Mainstreets Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Mainstreets and AVIC Heavy 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 AVIC Heavy Machinery are associated (or correlated) with Beijing Mainstreets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Mainstreets has no effect on the direction of AVIC Heavy i.e., AVIC Heavy and Beijing Mainstreets go up and down completely randomly.

Pair Corralation between AVIC Heavy and Beijing Mainstreets

Assuming the 90 days trading horizon AVIC Heavy is expected to generate 1.28 times less return on investment than Beijing Mainstreets. But when comparing it to its historical volatility, AVIC Heavy Machinery is 1.05 times less risky than Beijing Mainstreets. It trades about 0.15 of its potential returns per unit of risk. Beijing Mainstreets Investment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Beijing Mainstreets Investment on September 14, 2024 and sell it today you would earn a total of  73.00  from holding Beijing Mainstreets Investment or generate 39.25% return on investment over 90 days.

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

AVIC Heavy Machinery  vs.  Beijing Mainstreets Investment

AVIC Heavy Machinery

Risk-Adjusted Performance

12 of 100

Good

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

Beijing Mainstreets

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with AVIC Heavy and Beijing Mainstreets

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

The idea behind AVIC Heavy Machinery and Beijing Mainstreets Investment 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.