Correlation Between Guangzhou Seagull and Holitech Technology

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

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

Diversification Opportunities for Guangzhou Seagull and Holitech Technology

0.77

Correlation Coefficient

Guangzhou Seagull  Holitech Technology

Poor diversification

The 3 months correlation between Guangzhou and Holitech is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Seagull Kitchen and Holitech Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holitech Technology and Guangzhou Seagull 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 Guangzhou Seagull Kitchen are associated (or correlated) with Holitech Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holitech Technology has no effect on the direction of Guangzhou Seagull i.e., Guangzhou Seagull and Holitech Technology go up and down completely randomly.

Pair Corralation between Guangzhou Seagull and Holitech Technology

Assuming the 90 days trading horizon Guangzhou Seagull Kitchen is expected to generate 0.85 times more return on investment than Holitech Technology. However, Guangzhou Seagull Kitchen is 1.18 times less risky than Holitech Technology. It trades about 0.13 of its potential returns per unit of risk. Holitech Technology Co is currently generating about -0.02 per unit of risk. If you would invest  308.00  in Guangzhou Seagull Kitchen on September 20, 2024 and sell it today you would earn a total of  23.00  from holding Guangzhou Seagull Kitchen or generate 7.47% return on investment over 90 days.

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

Guangzhou Seagull Kitchen  vs.  Holitech Technology Co

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Seagull Kitchen are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Seagull sustained solid returns over the last few months and may actually be approaching a breakup point.

Holitech Technology

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Holitech Technology Co are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holitech Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Seagull and Holitech Technology

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

The idea behind Guangzhou Seagull Kitchen and Holitech Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.