Correlation Between Ping An and Beijing Shunxin

Can any of the company-specific risk be diversified away by investing in both Ping An and Beijing Shunxin 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 Shunxin 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 Shunxin Agriculture, you can compare the effects of market volatilities on Ping An and Beijing Shunxin 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 Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Beijing Shunxin.

Diversification Opportunities for Ping An and Beijing Shunxin

0.73

Correlation Coefficient

Ping An  Beijing Shunxin

Poor diversification

The 3 months correlation between Ping and Beijing is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri 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 Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Ping An i.e., Ping An and Beijing Shunxin go up and down completely randomly.

Pair Corralation between Ping An and Beijing Shunxin

Assuming the 90 days trading horizon Ping An is expected to generate 2.02 times less return on investment than Beijing Shunxin. But when comparing it to its historical volatility, Ping An Insurance is 1.21 times less risky than Beijing Shunxin. It trades about 0.05 of its potential returns per unit of risk. Beijing Shunxin Agriculture is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,672  in Beijing Shunxin Agriculture on September 26, 2024 and sell it today you would earn a total of  257.00  from holding Beijing Shunxin Agriculture or generate 15.37% return on investment over 90 days.

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

Ping An Insurance  vs.  Beijing Shunxin Agriculture

Ping An Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beijing Shunxin Agri

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Ping An and Beijing Shunxin

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

The idea behind Ping An Insurance and Beijing Shunxin Agriculture 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.