Correlation Between Dongjiang Environmental and Beijing Yanjing
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By analyzing existing cross correlation between Dongjiang Environmental Co and Beijing Yanjing Brewery, you can compare the effects of market volatilities on Dongjiang Environmental 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 Dongjiang Environmental with a short position of Beijing Yanjing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongjiang Environmental and Beijing Yanjing.
Diversification Opportunities for Dongjiang Environmental and Beijing Yanjing
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongjiang and Beijing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dongjiang Environmental Co 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 Dongjiang Environmental 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 Dongjiang Environmental Co 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 Dongjiang Environmental i.e., Dongjiang Environmental and Beijing Yanjing go up and down completely randomly.
Pair Corralation between Dongjiang Environmental and Beijing Yanjing
Assuming the 90 days trading horizon Dongjiang Environmental Co is expected to generate 1.42 times more return on investment than Beijing Yanjing. However, Dongjiang Environmental is 1.42 times more volatile than Beijing Yanjing Brewery. It trades about -0.07 of its potential returns per unit of risk. Beijing Yanjing Brewery is currently generating about -0.21 per unit of risk. If you would invest 509.00 in Dongjiang Environmental Co on August 24, 2024 and sell it today you would lose (21.00) from holding Dongjiang Environmental Co or give up 4.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dongjiang Environmental Co vs. Beijing Yanjing Brewery
Performance |
| Timeline |
| Dongjiang Environmental |
| Beijing Yanjing Brewery |
Dongjiang Environmental and Beijing Yanjing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongjiang Environmental and Beijing Yanjing
The main advantage of trading using opposite Dongjiang Environmental and Beijing Yanjing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongjiang Environmental 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 Dongjiang Environmental Co 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.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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