Correlation Between Gansu Huangtai and Shandong Longquan

Can any of the company-specific risk be diversified away by investing in both Gansu Huangtai and Shandong Longquan 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 Gansu Huangtai and Shandong Longquan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gansu Huangtai Wine marketing and Shandong Longquan Pipeline, you can compare the effects of market volatilities on Gansu Huangtai and Shandong Longquan 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 Gansu Huangtai with a short position of Shandong Longquan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Shandong Longquan.

Diversification Opportunities for Gansu Huangtai and Shandong Longquan

0.81

Correlation Coefficient

Gansu Huangtai  Shandong Longquan

Very poor diversification

The 3 months correlation between Gansu and Shandong is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Shandong Longquan Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longquan and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Shandong Longquan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longquan has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Shandong Longquan go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Shandong Longquan

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to generate 1.66 times more return on investment than Shandong Longquan. However, Gansu Huangtai is 1.66 times more volatile than Shandong Longquan Pipeline. It trades about 0.15 of its potential returns per unit of risk. Shandong Longquan Pipeline is currently generating about 0.09 per unit of risk. If you would invest  781.00  in Gansu Huangtai Wine marketing on September 29, 2024 and sell it today you would earn a total of  756.00  from holding Gansu Huangtai Wine marketing or generate 96.8% return on investment over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Shandong Longquan Pipeline

Gansu Huangtai Wine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shandong Longquan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longquan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Huangtai and Shandong Longquan

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

The idea behind Gansu Huangtai Wine marketing and Shandong Longquan Pipeline 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.