Correlation Between Jiugui Liquor and Guangdong Silvere

Can any of the company-specific risk be diversified away by investing in both Jiugui Liquor and Guangdong Silvere 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 Guangdong Silvere 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 Guangdong Silvere Sci, you can compare the effects of market volatilities on Jiugui Liquor and Guangdong Silvere 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 Guangdong Silvere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiugui Liquor and Guangdong Silvere.

Diversification Opportunities for Jiugui Liquor and Guangdong Silvere

0.91

Correlation Coefficient

Jiugui Liquor  Guangdong Silvere

Almost no diversification

The 3 months correlation between Jiugui and Guangdong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Guangdong Silvere Sci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Silvere Sci 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 Guangdong Silvere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Silvere Sci has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Guangdong Silvere go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Guangdong Silvere

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to generate 0.99 times more return on investment than Guangdong Silvere. However, Jiugui Liquor Co is 1.01 times less risky than Guangdong Silvere. It trades about 0.25 of its potential returns per unit of risk. Guangdong Silvere Sci is currently generating about 0.14 per unit of risk. If you would invest  3,433  in Jiugui Liquor Co on September 14, 2024 and sell it today you would earn a total of  2,512  from holding Jiugui Liquor Co or generate 73.17% return on investment over 90 days.

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

Jiugui Liquor Co  vs.  Guangdong Silvere Sci

Jiugui Liquor

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 19 (%) 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.

Guangdong Silvere Sci

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Jiugui Liquor and Guangdong Silvere

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

The idea behind Jiugui Liquor Co and Guangdong Silvere Sci 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.