Correlation Between Chengdu Kanghua and Beijing Shunxin
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By analyzing existing cross correlation between Chengdu Kanghua Biological and Beijing Shunxin Agriculture, you can compare the effects of market volatilities on Chengdu Kanghua and Beijing Shunxin 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 Chengdu Kanghua with a short position of Beijing Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Kanghua and Beijing Shunxin.
Diversification Opportunities for Chengdu Kanghua and Beijing Shunxin
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chengdu and Beijing is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with Beijing Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and Beijing Shunxin go up and down completely randomly.
Pair Corralation between Chengdu Kanghua and Beijing Shunxin
Assuming the 90 days trading horizon Chengdu Kanghua Biological is expected to under-perform the Beijing Shunxin. But the stock apears to be less risky and, when comparing its historical volatility, Chengdu Kanghua Biological is 1.01 times less risky than Beijing Shunxin. The stock trades about -0.12 of its potential returns per unit of risk. The Beijing Shunxin Agriculture is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,718 in Beijing Shunxin Agriculture on November 7, 2024 and sell it today you would lose (6.00) from holding Beijing Shunxin Agriculture or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chengdu Kanghua Biological vs. Beijing Shunxin Agriculture
Performance |
| Timeline |
| Chengdu Kanghua Biol |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Beijing Shunxin Agri |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chengdu Kanghua and Beijing Shunxin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chengdu Kanghua and Beijing Shunxin
The main advantage of trading using opposite Chengdu Kanghua and Beijing Shunxin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu Kanghua position performs unexpectedly, Beijing Shunxin 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 Shunxin will offset losses from the drop in Beijing Shunxin's long position.The idea behind Chengdu Kanghua Biological and Beijing Shunxin Agriculture 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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