Correlation Between Henan Shuanghui and Guangdong Qunxing

Can any of the company-specific risk be diversified away by investing in both Henan Shuanghui and Guangdong Qunxing 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 Henan Shuanghui and Guangdong Qunxing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henan Shuanghui Investment and Guangdong Qunxing Toys, you can compare the effects of market volatilities on Henan Shuanghui and Guangdong Qunxing 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 Henan Shuanghui with a short position of Guangdong Qunxing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shuanghui and Guangdong Qunxing.

Diversification Opportunities for Henan Shuanghui and Guangdong Qunxing

0.58

Correlation Coefficient

Henan Shuanghui  Guangdong Qunxing

Very weak diversification

The 3 months correlation between Henan and Guangdong is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and Guangdong Qunxing Toys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Qunxing Toys and Henan Shuanghui 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 Henan Shuanghui Investment are associated (or correlated) with Guangdong Qunxing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Qunxing Toys has no effect on the direction of Henan Shuanghui i.e., Henan Shuanghui and Guangdong Qunxing go up and down completely randomly.

Pair Corralation between Henan Shuanghui and Guangdong Qunxing

Assuming the 90 days trading horizon Henan Shuanghui is expected to generate 4.25 times less return on investment than Guangdong Qunxing. But when comparing it to its historical volatility, Henan Shuanghui Investment is 2.06 times less risky than Guangdong Qunxing. It trades about 0.06 of its potential returns per unit of risk. Guangdong Qunxing Toys is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  465.00  in Guangdong Qunxing Toys on September 22, 2024 and sell it today you would earn a total of  289.00  from holding Guangdong Qunxing Toys or generate 62.15% return on investment over 90 days.

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

Henan Shuanghui Investment  vs.  Guangdong Qunxing Toys

Henan Shuanghui Inve

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shuanghui Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shuanghui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guangdong Qunxing Toys

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Qunxing Toys are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Qunxing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henan Shuanghui and Guangdong Qunxing

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

The idea behind Henan Shuanghui Investment and Guangdong Qunxing Toys 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.