Correlation Between Gotion High and Guanghui Energy

Can any of the company-specific risk be diversified away by investing in both Gotion High and Guanghui Energy 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 Gotion High and Guanghui Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gotion High tech and Guanghui Energy Co, you can compare the effects of market volatilities on Gotion High and Guanghui Energy 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 Gotion High with a short position of Guanghui Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotion High and Guanghui Energy.

Diversification Opportunities for Gotion High and Guanghui Energy

0.78

Correlation Coefficient

Gotion High  Guanghui Energy

Poor diversification

The 3 months correlation between Gotion and Guanghui is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gotion High tech and Guanghui Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guanghui Energy and Gotion High 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 Gotion High tech are associated (or correlated) with Guanghui Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guanghui Energy has no effect on the direction of Gotion High i.e., Gotion High and Guanghui Energy go up and down completely randomly.

Pair Corralation between Gotion High and Guanghui Energy

Assuming the 90 days trading horizon Gotion High tech is expected to under-perform the Guanghui Energy. In addition to that, Gotion High is 1.09 times more volatile than Guanghui Energy Co. It trades about -0.02 of its total potential returns per unit of risk. Guanghui Energy Co is currently generating about 0.0 per unit of volatility. If you would invest  686.00  in Guanghui Energy Co on October 22, 2024 and sell it today you would lose (73.00) from holding Guanghui Energy Co or give up 10.64% of portfolio value over 90 days.

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

Gotion High tech  vs.  Guanghui Energy Co

Gotion High tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotion High tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gotion High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guanghui Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guanghui Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gotion High and Guanghui Energy

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

The idea behind Gotion High tech and Guanghui Energy Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.