Correlation Between Beijing HuaYuanYiTong and Jiangsu Phoenix

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

Diversification Opportunities for Beijing HuaYuanYiTong and Jiangsu Phoenix

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Beijing and Jiangsu is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Beijing HuaYuanYiTong Thermal and Jiangsu Phoenix Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Phoenix Publ and Beijing HuaYuanYiTong 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 HuaYuanYiTong Thermal are associated (or correlated) with Jiangsu Phoenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Phoenix Publ has no effect on the direction of Beijing HuaYuanYiTong i.e., Beijing HuaYuanYiTong and Jiangsu Phoenix go up and down completely randomly.

Pair Corralation between Beijing HuaYuanYiTong and Jiangsu Phoenix

Assuming the 90 days trading horizon Beijing HuaYuanYiTong Thermal is expected to under-perform the Jiangsu Phoenix. In addition to that, Beijing HuaYuanYiTong is 1.04 times more volatile than Jiangsu Phoenix Publishing. It trades about -0.39 of its total potential returns per unit of risk. Jiangsu Phoenix Publishing is currently generating about -0.12 per unit of volatility. If you would invest  1,114  in Jiangsu Phoenix Publishing on October 18, 2024 and sell it today you would lose (60.00) from holding Jiangsu Phoenix Publishing or give up 5.39% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Beijing HuaYuanYiTong Thermal  vs.  Jiangsu Phoenix Publishing

 Performance 
       Timeline  
Beijing HuaYuanYiTong 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Beijing HuaYuanYiTong Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Jiangsu Phoenix Publ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Jiangsu Phoenix Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangsu Phoenix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beijing HuaYuanYiTong and Jiangsu Phoenix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing HuaYuanYiTong and Jiangsu Phoenix

The main advantage of trading using opposite Beijing HuaYuanYiTong and Jiangsu Phoenix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing HuaYuanYiTong position performs unexpectedly, Jiangsu Phoenix 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 Jiangsu Phoenix will offset losses from the drop in Jiangsu Phoenix's long position.
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The idea behind Beijing HuaYuanYiTong Thermal and Jiangsu Phoenix Publishing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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