Correlation Between Ping An and Beijing Mainstreets

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

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

Diversification Opportunities for Ping An and Beijing Mainstreets

0.29

Correlation Coefficient

Ping An  Beijing Mainstreets

Modest diversification

The 3 months correlation between Ping and Beijing is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Beijing Mainstreets Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Mainstreets and Ping An 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 Ping An Insurance 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 Ping An i.e., Ping An and Beijing Mainstreets go up and down completely randomly.

Pair Corralation between Ping An and Beijing Mainstreets

Assuming the 90 days trading horizon Ping An is expected to generate 1.45 times less return on investment than Beijing Mainstreets. But when comparing it to its historical volatility, Ping An Insurance is 1.2 times less risky than Beijing Mainstreets. It trades about 0.11 of its potential returns per unit of risk. Beijing Mainstreets Investment is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Beijing Mainstreets Investment on September 23, 2024 and sell it today you would earn a total of  54.00  from holding Beijing Mainstreets Investment or generate 29.19% return on investment over 90 days.

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

Ping An Insurance  vs.  Beijing Mainstreets Investment

Ping An Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Mainstreets

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Mainstreets Investment are ranked lower than 10 (%) 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 Ping An and Beijing Mainstreets

The main advantage of trading using opposite Ping An and Beijing Mainstreets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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 Ping An Insurance 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.