Correlation Between Shandong Publishing and Beijing Kaiwen

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

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

Diversification Opportunities for Shandong Publishing and Beijing Kaiwen

-0.53

Correlation Coefficient

Shandong Publishing  Beijing Kaiwen

Excellent diversification

The 3 months correlation between Shandong and Beijing is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Beijing Kaiwen Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kaiwen Education and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with Beijing Kaiwen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kaiwen Education has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Beijing Kaiwen go up and down completely randomly.

Pair Corralation between Shandong Publishing and Beijing Kaiwen

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Beijing Kaiwen. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.52 times less risky than Beijing Kaiwen. The stock trades about -0.03 of its potential returns per unit of risk. The Beijing Kaiwen Education is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Beijing Kaiwen Education on September 15, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shandong Publishing Media  vs.  Beijing Kaiwen Education

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Shandong Publishing and Beijing Kaiwen

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

The idea behind Shandong Publishing Media and Beijing Kaiwen Education 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.