Correlation Between Anhui Gujing and Guangzhou Jointas

Can any of the company-specific risk be diversified away by investing in both Anhui Gujing and Guangzhou Jointas 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 Anhui Gujing and Guangzhou Jointas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anhui Gujing Distillery and Guangzhou Jointas Chemical, you can compare the effects of market volatilities on Anhui Gujing and Guangzhou Jointas 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 Anhui Gujing with a short position of Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Gujing and Guangzhou Jointas.

Diversification Opportunities for Anhui Gujing and Guangzhou Jointas

0.31

Correlation Coefficient

Anhui Gujing  Guangzhou Jointas

Weak diversification

The 3 months correlation between Anhui and Guangzhou is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Gujing Distillery and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas and Anhui Gujing 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 Anhui Gujing Distillery are associated (or correlated) with Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of Anhui Gujing i.e., Anhui Gujing and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between Anhui Gujing and Guangzhou Jointas

Assuming the 90 days trading horizon Anhui Gujing is expected to generate 3.73 times less return on investment than Guangzhou Jointas. In addition to that, Anhui Gujing is 1.04 times more volatile than Guangzhou Jointas Chemical. It trades about 0.04 of its total potential returns per unit of risk. Guangzhou Jointas Chemical is currently generating about 0.15 per unit of volatility. If you would invest  509.00  in Guangzhou Jointas Chemical on December 26, 2024 and sell it today you would earn a total of  87.00  from holding Guangzhou Jointas Chemical or generate 17.09% return on investment over 90 days.

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

Anhui Gujing Distillery  vs.  Guangzhou Jointas Chemical

Anhui Gujing Distillery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Gujing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Jointas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Gujing and Guangzhou Jointas

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

The idea behind Anhui Gujing Distillery and Guangzhou Jointas Chemical 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 Transaction History module to view history of all your transactions and understand their impact on performance.