Correlation Between Beijing Watertek and Shandong Intco
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By analyzing existing cross correlation between Beijing Watertek Information and Shandong Intco Medical, you can compare the effects of market volatilities on Beijing Watertek and Shandong Intco 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 Watertek with a short position of Shandong Intco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Watertek and Shandong Intco.
Diversification Opportunities for Beijing Watertek and Shandong Intco
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beijing and Shandong is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Watertek Information and Shandong Intco Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Intco Medical and Beijing Watertek 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 Watertek Information are associated (or correlated) with Shandong Intco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Intco Medical has no effect on the direction of Beijing Watertek i.e., Beijing Watertek and Shandong Intco go up and down completely randomly.
Pair Corralation between Beijing Watertek and Shandong Intco
Assuming the 90 days trading horizon Beijing Watertek Information is expected to generate 1.66 times more return on investment than Shandong Intco. However, Beijing Watertek is 1.66 times more volatile than Shandong Intco Medical. It trades about 0.2 of its potential returns per unit of risk. Shandong Intco Medical is currently generating about 0.31 per unit of risk. If you would invest 321.00 in Beijing Watertek Information on November 8, 2024 and sell it today you would earn a total of 34.00 from holding Beijing Watertek Information or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beijing Watertek Information vs. Shandong Intco Medical
Performance |
| Timeline |
| Beijing Watertek Inf |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shandong Intco Medical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Beijing Watertek and Shandong Intco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beijing Watertek and Shandong Intco
The main advantage of trading using opposite Beijing Watertek and Shandong Intco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Watertek position performs unexpectedly, Shandong Intco 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 Shandong Intco will offset losses from the drop in Shandong Intco's long position.The idea behind Beijing Watertek Information and Shandong Intco Medical 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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