Correlation Between Jiugui Liquor and Guangzhou Tinci

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

By analyzing existing cross correlation between Jiugui Liquor Co and Guangzhou Tinci Materials, you can compare the effects of market volatilities on Jiugui Liquor and Guangzhou Tinci 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 Jiugui Liquor with a short position of Guangzhou Tinci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Guangzhou Tinci.

Diversification Opportunities for Jiugui Liquor and Guangzhou Tinci

0.89

Correlation Coefficient

Jiugui Liquor  Guangzhou Tinci

Very poor diversification

The 3 months correlation between Jiugui and Guangzhou is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Guangzhou Tinci Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Tinci Materials and Jiugui Liquor 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 Jiugui Liquor Co are associated (or correlated) with Guangzhou Tinci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Tinci Materials has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Guangzhou Tinci go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Guangzhou Tinci

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Guangzhou Tinci. But the stock apears to be less risky and, when comparing its historical volatility, Jiugui Liquor Co is 1.17 times less risky than Guangzhou Tinci. The stock trades about -0.06 of its potential returns per unit of risk. The Guangzhou Tinci Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,339  in Guangzhou Tinci Materials on September 26, 2024 and sell it today you would lose (2,233) from holding Guangzhou Tinci Materials or give up 51.46% of portfolio value over 90 days.

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

Jiugui Liquor Co  vs.  Guangzhou Tinci Materials

Jiugui Liquor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Tinci Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Tinci Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Tinci sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiugui Liquor and Guangzhou Tinci

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

The idea behind Jiugui Liquor Co and Guangzhou Tinci Materials 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.