Correlation Between Daido Steel and Beijing MediaLimited
Can any of the company-specific risk be diversified away by investing in both Daido Steel and Beijing MediaLimited at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Daido Steel and Beijing MediaLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daido Steel Co and Beijing Media, you can compare the effects of market volatilities on Daido Steel and Beijing MediaLimited 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 Daido Steel with a short position of Beijing MediaLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daido Steel and Beijing MediaLimited.
Diversification Opportunities for Daido Steel and Beijing MediaLimited
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daido and Beijing is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Daido Steel Co and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing MediaLimited and Daido Steel 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 Daido Steel Co are associated (or correlated) with Beijing MediaLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing MediaLimited has no effect on the direction of Daido Steel i.e., Daido Steel and Beijing MediaLimited go up and down completely randomly.
Pair Corralation between Daido Steel and Beijing MediaLimited
Assuming the 90 days horizon Daido Steel Co is expected to under-perform the Beijing MediaLimited. But the stock apears to be less risky and, when comparing its historical volatility, Daido Steel Co is 1.75 times less risky than Beijing MediaLimited. The stock trades about -0.06 of its potential returns per unit of risk. The Beijing Media is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4.20 in Beijing Media on September 2, 2024 and sell it today you would lose (1.00) from holding Beijing Media or give up 23.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daido Steel Co vs. Beijing Media
Performance |
| Timeline |
| Daido Steel |
| Beijing MediaLimited |
Daido Steel and Beijing MediaLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daido Steel and Beijing MediaLimited
The main advantage of trading using opposite Daido Steel and Beijing MediaLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daido Steel position performs unexpectedly, Beijing MediaLimited 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 MediaLimited will offset losses from the drop in Beijing MediaLimited's long position.The idea behind Daido Steel Co and Beijing Media 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.| Beijing MediaLimited vs. Haverty Furniture Companies | Beijing MediaLimited vs. MI Homes | Beijing MediaLimited vs. Addus HomeCare | Beijing MediaLimited vs. MHP Hotel AG |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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