Correlation Between Beijing HuaYuanYiTong and Liaoning Chengda
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By analyzing existing cross correlation between Beijing HuaYuanYiTong Thermal and Liaoning Chengda Biotechnology, you can compare the effects of market volatilities on Beijing HuaYuanYiTong and Liaoning Chengda 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 Liaoning Chengda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing HuaYuanYiTong and Liaoning Chengda.
Diversification Opportunities for Beijing HuaYuanYiTong and Liaoning Chengda
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Beijing and Liaoning is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Beijing HuaYuanYiTong Thermal and Liaoning Chengda Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Chengda Bio 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 Liaoning Chengda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Chengda Bio has no effect on the direction of Beijing HuaYuanYiTong i.e., Beijing HuaYuanYiTong and Liaoning Chengda go up and down completely randomly.
Pair Corralation between Beijing HuaYuanYiTong and Liaoning Chengda
Assuming the 90 days trading horizon Beijing HuaYuanYiTong Thermal is expected to under-perform the Liaoning Chengda. In addition to that, Beijing HuaYuanYiTong is 1.51 times more volatile than Liaoning Chengda Biotechnology. It trades about -0.28 of its total potential returns per unit of risk. Liaoning Chengda Biotechnology is currently generating about -0.26 per unit of volatility. If you would invest 2,634 in Liaoning Chengda Biotechnology on October 22, 2024 and sell it today you would lose (159.00) from holding Liaoning Chengda Biotechnology or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beijing HuaYuanYiTong Thermal vs. Liaoning Chengda Biotechnology
Performance |
| Timeline |
| Beijing HuaYuanYiTong |
| Liaoning Chengda Bio |
Beijing HuaYuanYiTong and Liaoning Chengda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beijing HuaYuanYiTong and Liaoning Chengda
The main advantage of trading using opposite Beijing HuaYuanYiTong and Liaoning Chengda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing HuaYuanYiTong position performs unexpectedly, Liaoning Chengda 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 Liaoning Chengda will offset losses from the drop in Liaoning Chengda's long position.The idea behind Beijing HuaYuanYiTong Thermal and Liaoning Chengda Biotechnology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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