Correlation Between Chongqing Changan and Beijing Yanjing
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By analyzing existing cross correlation between Chongqing Changan Automobile and Beijing Yanjing Brewery, you can compare the effects of market volatilities on Chongqing Changan and Beijing Yanjing 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 Chongqing Changan with a short position of Beijing Yanjing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Beijing Yanjing.
Diversification Opportunities for Chongqing Changan and Beijing Yanjing
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chongqing and Beijing is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Beijing Yanjing Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Yanjing Brewery and Chongqing Changan 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 Chongqing Changan Automobile are associated (or correlated) with Beijing Yanjing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Yanjing Brewery has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and Beijing Yanjing go up and down completely randomly.
Pair Corralation between Chongqing Changan and Beijing Yanjing
Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to generate 0.88 times more return on investment than Beijing Yanjing. However, Chongqing Changan Automobile is 1.13 times less risky than Beijing Yanjing. It trades about -0.05 of its potential returns per unit of risk. Beijing Yanjing Brewery is currently generating about -0.17 per unit of risk. If you would invest 1,285 in Chongqing Changan Automobile on November 8, 2024 and sell it today you would lose (16.00) from holding Chongqing Changan Automobile or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Changan Automobile vs. Beijing Yanjing Brewery
Performance |
| Timeline |
| Chongqing Changan |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Beijing Yanjing Brewery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Chongqing Changan and Beijing Yanjing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Changan and Beijing Yanjing
The main advantage of trading using opposite Chongqing Changan and Beijing Yanjing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Changan position performs unexpectedly, Beijing Yanjing 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 Yanjing will offset losses from the drop in Beijing Yanjing's long position.The idea behind Chongqing Changan Automobile and Beijing Yanjing Brewery 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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