Correlation Between Beijing Sanyuan and Weihai Guangwei
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By analyzing existing cross correlation between Beijing Sanyuan Foods and Weihai Guangwei Composites, you can compare the effects of market volatilities on Beijing Sanyuan and Weihai Guangwei 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 Sanyuan with a short position of Weihai Guangwei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Sanyuan and Weihai Guangwei.
Diversification Opportunities for Beijing Sanyuan and Weihai Guangwei
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Beijing and Weihai is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Sanyuan Foods and Weihai Guangwei Composites in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Guangwei Comp and Beijing Sanyuan 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 Sanyuan Foods are associated (or correlated) with Weihai Guangwei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Guangwei Comp has no effect on the direction of Beijing Sanyuan i.e., Beijing Sanyuan and Weihai Guangwei go up and down completely randomly.
Pair Corralation between Beijing Sanyuan and Weihai Guangwei
Assuming the 90 days trading horizon Beijing Sanyuan Foods is expected to generate 0.65 times more return on investment than Weihai Guangwei. However, Beijing Sanyuan Foods is 1.55 times less risky than Weihai Guangwei. It trades about 0.01 of its potential returns per unit of risk. Weihai Guangwei Composites is currently generating about 0.0 per unit of risk. If you would invest 519.00 in Beijing Sanyuan Foods on September 14, 2024 and sell it today you would earn a total of 13.00 from holding Beijing Sanyuan Foods or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beijing Sanyuan Foods vs. Weihai Guangwei Composites
Performance |
| Timeline |
| Beijing Sanyuan Foods |
| Weihai Guangwei Comp |
Beijing Sanyuan and Weihai Guangwei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beijing Sanyuan and Weihai Guangwei
The main advantage of trading using opposite Beijing Sanyuan and Weihai Guangwei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Sanyuan position performs unexpectedly, Weihai Guangwei 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 Weihai Guangwei will offset losses from the drop in Weihai Guangwei's long position.The idea behind Beijing Sanyuan Foods and Weihai Guangwei Composites 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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