Correlation Between Beijing Roborock and Huafa Industrial

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

Diversification Opportunities for Beijing Roborock and Huafa Industrial

0.33

Correlation Coefficient

Beijing Roborock  Huafa Industrial

Weak diversification

The 3 months correlation between Beijing and Huafa is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and Huafa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huafa Industrial 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 Huafa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huafa Industrial has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and Huafa Industrial go up and down completely randomly.

Pair Corralation between Beijing Roborock and Huafa Industrial

Assuming the 90 days trading horizon Beijing Roborock is expected to generate 116.63 times less return on investment than Huafa Industrial. In addition to that, Beijing Roborock is 1.62 times more volatile than Huafa Industrial Co. It trades about 0.0 of its total potential returns per unit of risk. Huafa Industrial Co is currently generating about 0.11 per unit of volatility. If you would invest  564.00  in Huafa Industrial Co on September 3, 2024 and sell it today you would earn a total of  108.00  from holding Huafa Industrial Co or generate 19.15% return on investment over 90 days.

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

Beijing Roborock Technology  vs.  Huafa Industrial Co

Beijing Roborock Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Roborock Technology has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Huafa Industrial

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Beijing Roborock and Huafa Industrial

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

The idea behind Beijing Roborock Technology and Huafa Industrial Co 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.