Correlation Between North Huajin and Guobo Electronics

Can any of the company-specific risk be diversified away by investing in both North Huajin and Guobo Electronics 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 North Huajin and Guobo Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North Huajin Chemical and Guobo Electronics Co, you can compare the effects of market volatilities on North Huajin and Guobo Electronics 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 North Huajin with a short position of Guobo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Huajin and Guobo Electronics.

Diversification Opportunities for North Huajin and Guobo Electronics

0.66

Correlation Coefficient

North Huajin  Guobo Electronics

Poor diversification

The 3 months correlation between North and Guobo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding North Huajin Chemical and Guobo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guobo Electronics and North Huajin 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 North Huajin Chemical are associated (or correlated) with Guobo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guobo Electronics has no effect on the direction of North Huajin i.e., North Huajin and Guobo Electronics go up and down completely randomly.

Pair Corralation between North Huajin and Guobo Electronics

Assuming the 90 days trading horizon North Huajin Chemical is expected to under-perform the Guobo Electronics. But the stock apears to be less risky and, when comparing its historical volatility, North Huajin Chemical is 1.14 times less risky than Guobo Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Guobo Electronics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,422  in Guobo Electronics Co on September 30, 2024 and sell it today you would lose (580.00) from holding Guobo Electronics Co or give up 10.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

North Huajin Chemical  vs.  Guobo Electronics Co

North Huajin Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North Huajin Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, North Huajin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guobo Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guobo Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guobo Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with North Huajin and Guobo Electronics

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

The idea behind North Huajin Chemical and Guobo Electronics Co 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.