Correlation Between Beijing Roborock and Guangdong Shenglu

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

By analyzing existing cross correlation between Beijing Roborock Technology and Guangdong Shenglu Telecommunication, you can compare the effects of market volatilities on Beijing Roborock and Guangdong Shenglu 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 Beijing Roborock with a short position of Guangdong Shenglu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Roborock and Guangdong Shenglu.

Diversification Opportunities for Beijing Roborock and Guangdong Shenglu

-0.26

Correlation Coefficient

Beijing Roborock  Guangdong Shenglu

Very good diversification

The 3 months correlation between Beijing and Guangdong is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and Guangdong Shenglu Telecommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Shenglu and Beijing Roborock 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 Beijing Roborock Technology are associated (or correlated) with Guangdong Shenglu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Shenglu has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and Guangdong Shenglu go up and down completely randomly.

Pair Corralation between Beijing Roborock and Guangdong Shenglu

Assuming the 90 days trading horizon Beijing Roborock is expected to generate 4.22 times less return on investment than Guangdong Shenglu. In addition to that, Beijing Roborock is 1.37 times more volatile than Guangdong Shenglu Telecommunication. It trades about 0.02 of its total potential returns per unit of risk. Guangdong Shenglu Telecommunication is currently generating about 0.12 per unit of volatility. If you would invest  561.00  in Guangdong Shenglu Telecommunication on September 25, 2024 and sell it today you would earn a total of  126.00  from holding Guangdong Shenglu Telecommunication or generate 22.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Beijing Roborock Technology  vs.  Guangdong Shenglu Telecommunic

Beijing Roborock Tec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Roborock Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Roborock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangdong Shenglu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Shenglu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing Roborock and Guangdong Shenglu

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

The idea behind Beijing Roborock Technology and Guangdong Shenglu Telecommunication 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.