Correlation Between Shanghai Yaoji and Beijing Lanxum

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Can any of the company-specific risk be diversified away by investing in both Shanghai Yaoji and Beijing Lanxum 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 Shanghai Yaoji and Beijing Lanxum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Yaoji Playing and Beijing Lanxum Tech, you can compare the effects of market volatilities on Shanghai Yaoji and Beijing Lanxum 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 Shanghai Yaoji with a short position of Beijing Lanxum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Yaoji and Beijing Lanxum.

Diversification Opportunities for Shanghai Yaoji and Beijing Lanxum

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shanghai and Beijing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Beijing Lanxum Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Lanxum Tech and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Beijing Lanxum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Lanxum Tech has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Beijing Lanxum go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Beijing Lanxum

Assuming the 90 days trading horizon Shanghai Yaoji is expected to generate 1.41 times less return on investment than Beijing Lanxum. But when comparing it to its historical volatility, Shanghai Yaoji Playing is 1.37 times less risky than Beijing Lanxum. It trades about 0.07 of its potential returns per unit of risk. Beijing Lanxum Tech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Beijing Lanxum Tech on September 5, 2024 and sell it today you would earn a total of  667.00  from holding Beijing Lanxum Tech or generate 172.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.79%
ValuesDaily Returns

Shanghai Yaoji Playing  vs.  Beijing Lanxum Tech

 Performance 
       Timeline  
Shanghai Yaoji Playing 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yaoji sustained solid returns over the last few months and may actually be approaching a breakup point.
Beijing Lanxum Tech 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Lanxum Tech are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Lanxum sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Yaoji and Beijing Lanxum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Yaoji and Beijing Lanxum

The main advantage of trading using opposite Shanghai Yaoji and Beijing Lanxum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Yaoji position performs unexpectedly, Beijing Lanxum 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 Lanxum will offset losses from the drop in Beijing Lanxum's long position.
The idea behind Shanghai Yaoji Playing and Beijing Lanxum Tech 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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