Correlation Between Jiugui Liquor and Guangzhou Haozhi

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

Diversification Opportunities for Jiugui Liquor and Guangzhou Haozhi

0.72

Correlation Coefficient

Jiugui Liquor  Guangzhou Haozhi

Poor diversification

The 3 months correlation between Jiugui and Guangzhou is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Guangzhou Haozhi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haozhi Ind 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 Haozhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haozhi Ind has no effect on the direction of Jiugui Liquor i.e., Jiugui Liquor and Guangzhou Haozhi go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Guangzhou Haozhi

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Guangzhou Haozhi. But the stock apears to be less risky and, when comparing its historical volatility, Jiugui Liquor Co is 1.73 times less risky than Guangzhou Haozhi. The stock trades about -0.07 of its potential returns per unit of risk. The Guangzhou Haozhi Industrial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  854.00  in Guangzhou Haozhi Industrial on October 4, 2024 and sell it today you would earn a total of  1,038  from holding Guangzhou Haozhi Industrial or generate 121.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Jiugui Liquor Co  vs.  Guangzhou Haozhi Industrial

Jiugui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiugui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiugui Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Haozhi Ind

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiugui Liquor and Guangzhou Haozhi

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

The idea behind Jiugui Liquor Co and Guangzhou Haozhi Industrial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.