Correlation Between Changzhou Evergreen and Guilin Seamild

Can any of the company-specific risk be diversified away by investing in both Changzhou Evergreen and Guilin Seamild 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 Changzhou Evergreen and Guilin Seamild into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changzhou Evergreen Technology and Guilin Seamild Foods, you can compare the effects of market volatilities on Changzhou Evergreen and Guilin Seamild 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 Changzhou Evergreen with a short position of Guilin Seamild. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Evergreen and Guilin Seamild.

Diversification Opportunities for Changzhou Evergreen and Guilin Seamild

0.5

Correlation Coefficient

Changzhou Evergreen  Guilin Seamild

Very weak diversification

The 3 months correlation between Changzhou and Guilin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Evergreen Technology and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and Changzhou Evergreen 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 Changzhou Evergreen Technology are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Changzhou Evergreen i.e., Changzhou Evergreen and Guilin Seamild go up and down completely randomly.

Pair Corralation between Changzhou Evergreen and Guilin Seamild

Assuming the 90 days trading horizon Changzhou Evergreen is expected to generate 8.54 times less return on investment than Guilin Seamild. In addition to that, Changzhou Evergreen is 1.17 times more volatile than Guilin Seamild Foods. It trades about 0.01 of its total potential returns per unit of risk. Guilin Seamild Foods is currently generating about 0.13 per unit of volatility. If you would invest  1,261  in Guilin Seamild Foods on October 9, 2024 and sell it today you would earn a total of  304.00  from holding Guilin Seamild Foods or generate 24.11% return on investment over 90 days.

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

Changzhou Evergreen Technology  vs.  Guilin Seamild Foods

Changzhou Evergreen

Risk-Adjusted Performance

1 of 100

Very Weak

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

Guilin Seamild Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changzhou Evergreen and Guilin Seamild

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

The idea behind Changzhou Evergreen Technology and Guilin Seamild Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.