Correlation Between Advanced Technology and Guangzhou Seagull

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

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

Diversification Opportunities for Advanced Technology and Guangzhou Seagull

0.75

Correlation Coefficient

Advanced Technology  Guangzhou Seagull

Poor diversification

The 3 months correlation between Advanced and Guangzhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Technology Materials and Guangzhou Seagull Kitchen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Seagull Kitchen and Advanced Technology 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 Advanced Technology Materials are associated (or correlated) with Guangzhou Seagull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Seagull Kitchen has no effect on the direction of Advanced Technology i.e., Advanced Technology and Guangzhou Seagull go up and down completely randomly.

Pair Corralation between Advanced Technology and Guangzhou Seagull

Assuming the 90 days trading horizon Advanced Technology Materials is expected to generate 0.58 times more return on investment than Guangzhou Seagull. However, Advanced Technology Materials is 1.74 times less risky than Guangzhou Seagull. It trades about -0.31 of its potential returns per unit of risk. Guangzhou Seagull Kitchen is currently generating about -0.29 per unit of risk. If you would invest  1,210  in Advanced Technology Materials on October 6, 2024 and sell it today you would lose (161.00) from holding Advanced Technology Materials or give up 13.31% of portfolio value over 90 days.

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

Advanced Technology Materials  vs.  Guangzhou Seagull Kitchen

Advanced Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Technology Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Advanced Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Seagull Kitchen 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 Advanced Technology and Guangzhou Seagull

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

The idea behind Advanced Technology Materials and Guangzhou Seagull Kitchen 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.