Correlation Between Unigroup Guoxin and China Railway

Can any of the company-specific risk be diversified away by investing in both Unigroup Guoxin and China Railway 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 Unigroup Guoxin and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unigroup Guoxin Microelectronics and China Railway Group, you can compare the effects of market volatilities on Unigroup Guoxin and China Railway 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 Unigroup Guoxin with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unigroup Guoxin and China Railway.

Diversification Opportunities for Unigroup Guoxin and China Railway

0.9

Correlation Coefficient

Unigroup Guoxin  China Railway

Almost no diversification

The 3 months correlation between Unigroup and China is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Unigroup Guoxin Microelectroni and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group and Unigroup Guoxin 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 Unigroup Guoxin Microelectronics are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Unigroup Guoxin i.e., Unigroup Guoxin and China Railway go up and down completely randomly.

Pair Corralation between Unigroup Guoxin and China Railway

Assuming the 90 days trading horizon Unigroup Guoxin Microelectronics is expected to generate 1.4 times more return on investment than China Railway. However, Unigroup Guoxin is 1.4 times more volatile than China Railway Group. It trades about 0.19 of its potential returns per unit of risk. China Railway Group is currently generating about 0.11 per unit of risk. If you would invest  6,345  in Unigroup Guoxin Microelectronics on September 27, 2024 and sell it today you would earn a total of  375.00  from holding Unigroup Guoxin Microelectronics or generate 5.91% return on investment over 90 days.

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

Unigroup Guoxin Microelectroni  vs.  China Railway Group

Unigroup Guoxin Micr

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unigroup Guoxin Microelectronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unigroup Guoxin sustained solid returns over the last few months and may actually be approaching a breakup point.

China Railway Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Railway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unigroup Guoxin and China Railway

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

The idea behind Unigroup Guoxin Microelectronics and China Railway Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.