Correlation Between Hengdian Entertainment and Beijing Sanyuan
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By analyzing existing cross correlation between Hengdian Entertainment Co and Beijing Sanyuan Foods, you can compare the effects of market volatilities on Hengdian Entertainment and Beijing Sanyuan 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 Hengdian Entertainment with a short position of Beijing Sanyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengdian Entertainment and Beijing Sanyuan.
Diversification Opportunities for Hengdian Entertainment and Beijing Sanyuan
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hengdian and Beijing is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co and Beijing Sanyuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Sanyuan Foods and Hengdian Entertainment 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 Hengdian Entertainment Co are associated (or correlated) with Beijing Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Sanyuan Foods has no effect on the direction of Hengdian Entertainment i.e., Hengdian Entertainment and Beijing Sanyuan go up and down completely randomly.
Pair Corralation between Hengdian Entertainment and Beijing Sanyuan
Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to generate 1.82 times more return on investment than Beijing Sanyuan. However, Hengdian Entertainment is 1.82 times more volatile than Beijing Sanyuan Foods. It trades about 0.02 of its potential returns per unit of risk. Beijing Sanyuan Foods is currently generating about -0.02 per unit of risk. If you would invest 1,373 in Hengdian Entertainment Co on November 7, 2024 and sell it today you would earn a total of 102.00 from holding Hengdian Entertainment Co or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hengdian Entertainment Co vs. Beijing Sanyuan Foods
Performance |
| Timeline |
| Hengdian Entertainment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Beijing Sanyuan Foods |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hengdian Entertainment and Beijing Sanyuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hengdian Entertainment and Beijing Sanyuan
The main advantage of trading using opposite Hengdian Entertainment and Beijing Sanyuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengdian Entertainment position performs unexpectedly, Beijing Sanyuan 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 Sanyuan will offset losses from the drop in Beijing Sanyuan's long position.The idea behind Hengdian Entertainment Co and Beijing Sanyuan Foods 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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