Correlation Between Huaibei Mining and Beijing Yanjing

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

By analyzing existing cross correlation between Huaibei Mining Holdings and Beijing Yanjing Brewery, you can compare the effects of market volatilities on Huaibei Mining and Beijing Yanjing 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 Huaibei Mining with a short position of Beijing Yanjing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaibei Mining and Beijing Yanjing.

Diversification Opportunities for Huaibei Mining and Beijing Yanjing

0.47

Correlation Coefficient

Huaibei Mining  Beijing Yanjing

Very weak diversification

The 3 months correlation between Huaibei and Beijing is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Huaibei Mining Holdings and Beijing Yanjing Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Yanjing Brewery and Huaibei Mining 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 Huaibei Mining Holdings are associated (or correlated) with Beijing Yanjing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Yanjing Brewery has no effect on the direction of Huaibei Mining i.e., Huaibei Mining and Beijing Yanjing go up and down completely randomly.

Pair Corralation between Huaibei Mining and Beijing Yanjing

Assuming the 90 days trading horizon Huaibei Mining Holdings is expected to under-perform the Beijing Yanjing. In addition to that, Huaibei Mining is 1.08 times more volatile than Beijing Yanjing Brewery. It trades about 0.0 of its total potential returns per unit of risk. Beijing Yanjing Brewery is currently generating about 0.15 per unit of volatility. If you would invest  920.00  in Beijing Yanjing Brewery on September 23, 2024 and sell it today you would earn a total of  211.00  from holding Beijing Yanjing Brewery or generate 22.93% return on investment over 90 days.

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

Huaibei Mining Holdings  vs.  Beijing Yanjing Brewery

Huaibei Mining Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaibei Mining Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huaibei Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing Yanjing Brewery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Yanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaibei Mining and Beijing Yanjing

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

The idea behind Huaibei Mining Holdings and Beijing Yanjing Brewery 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.