Correlation Between BEIJING HAOHUA and FUJIAN AONONG

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Can any of the company-specific risk be diversified away by investing in both BEIJING HAOHUA and FUJIAN AONONG 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 BEIJING HAOHUA and FUJIAN AONONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BEIJING HAOHUA ENERGY and FUJIAN AONONG BIOLOGICAL, you can compare the effects of market volatilities on BEIJING HAOHUA and FUJIAN AONONG 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 HAOHUA with a short position of FUJIAN AONONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEIJING HAOHUA and FUJIAN AONONG.

Diversification Opportunities for BEIJING HAOHUA and FUJIAN AONONG

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between BEIJING and FUJIAN is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BEIJING HAOHUA ENERGY RESOURCE and FUJIAN AONONG BIOLOGICAL TECHN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJIAN AONONG BIOLOG and BEIJING HAOHUA 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 HAOHUA ENERGY are associated (or correlated) with FUJIAN AONONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJIAN AONONG BIOLOG has no effect on the direction of BEIJING HAOHUA i.e., BEIJING HAOHUA and FUJIAN AONONG go up and down completely randomly.

Pair Corralation between BEIJING HAOHUA and FUJIAN AONONG

Assuming the 90 days trading horizon BEIJING HAOHUA is expected to generate 1.59 times less return on investment than FUJIAN AONONG. But when comparing it to its historical volatility, BEIJING HAOHUA ENERGY is 1.24 times less risky than FUJIAN AONONG. It trades about 0.05 of its potential returns per unit of risk. FUJIAN AONONG BIOLOGICAL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,555  in FUJIAN AONONG BIOLOGICAL on May 14, 2022 and sell it today you would earn a total of  343.00  from holding FUJIAN AONONG BIOLOGICAL or generate 22.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.12%
ValuesDaily Returns

BEIJING HAOHUA ENERGY RESOURCE  vs.  FUJIAN AONONG BIOLOGICAL TECHN

 Performance (%) 
       Timeline  
BEIJING HAOHUA ENERGY 
BEIJING Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BEIJING HAOHUA ENERGY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BEIJING HAOHUA sustained solid returns over the last few months and may actually be approaching a breakup point.

BEIJING Price Channel

FUJIAN AONONG BIOLOG 
FUJIAN Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in FUJIAN AONONG BIOLOGICAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FUJIAN AONONG sustained solid returns over the last few months and may actually be approaching a breakup point.

FUJIAN Price Channel

BEIJING HAOHUA and FUJIAN AONONG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BEIJING HAOHUA and FUJIAN AONONG

The main advantage of trading using opposite BEIJING HAOHUA and FUJIAN AONONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BEIJING HAOHUA position performs unexpectedly, FUJIAN AONONG 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 FUJIAN AONONG will offset losses from the drop in FUJIAN AONONG's long position.

BEIJING HAOHUA ENERGY

Pair trading matchups for BEIJING HAOHUA

Citigroup vs. BEIJING HAOHUA
Visa vs. BEIJING HAOHUA
Ford vs. BEIJING HAOHUA
Crescent vs. BEIJING HAOHUA
Alphabet vs. BEIJING HAOHUA
Vmware vs. BEIJING HAOHUA
GM vs. BEIJING HAOHUA
Stmicroelectronics vs. BEIJING HAOHUA
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BEIJING HAOHUA as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BEIJING HAOHUA's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BEIJING HAOHUA's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BEIJING HAOHUA ENERGY.
The idea behind BEIJING HAOHUA ENERGY and FUJIAN AONONG BIOLOGICAL 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.

FUJIAN AONONG BIOLOGICAL

Pair trading matchups for FUJIAN AONONG

Crescent vs. FUJIAN AONONG
Citigroup vs. FUJIAN AONONG
Stmicroelectronics vs. FUJIAN AONONG
Ford vs. FUJIAN AONONG
Grayscale Ethereum vs. FUJIAN AONONG
B of A vs. FUJIAN AONONG
Vmware vs. FUJIAN AONONG
GM vs. FUJIAN AONONG
Visa vs. FUJIAN AONONG
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against FUJIAN AONONG as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. FUJIAN AONONG's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, FUJIAN AONONG's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to FUJIAN AONONG BIOLOGICAL.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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