Correlation Between Tieling Newcity and Guotai Junan

Can any of the company-specific risk be diversified away by investing in both Tieling Newcity and Guotai Junan 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 Tieling Newcity and Guotai Junan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tieling Newcity Investment and Guotai Junan Securities, you can compare the effects of market volatilities on Tieling Newcity and Guotai Junan 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 Tieling Newcity with a short position of Guotai Junan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tieling Newcity and Guotai Junan.

Diversification Opportunities for Tieling Newcity and Guotai Junan

-0.56

Correlation Coefficient

Tieling Newcity  Guotai Junan

Excellent diversification

The 3 months correlation between Tieling and Guotai is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tieling Newcity Investment and Guotai Junan Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Junan Securities and Tieling Newcity 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 Tieling Newcity Investment are associated (or correlated) with Guotai Junan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Junan Securities has no effect on the direction of Tieling Newcity i.e., Tieling Newcity and Guotai Junan go up and down completely randomly.

Pair Corralation between Tieling Newcity and Guotai Junan

Assuming the 90 days trading horizon Tieling Newcity Investment is expected to generate 1.74 times more return on investment than Guotai Junan. However, Tieling Newcity is 1.74 times more volatile than Guotai Junan Securities. It trades about 0.12 of its potential returns per unit of risk. Guotai Junan Securities is currently generating about -0.07 per unit of risk. If you would invest  248.00  in Tieling Newcity Investment on October 26, 2024 and sell it today you would earn a total of  52.00  from holding Tieling Newcity Investment or generate 20.97% return on investment over 90 days.

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

Tieling Newcity Investment  vs.  Guotai Junan Securities

Tieling Newcity Inve

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Guotai Junan Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Junan Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tieling Newcity and Guotai Junan

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

The idea behind Tieling Newcity Investment and Guotai Junan Securities 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.