Correlation Between Guangzhou Seagull and Poly Real

Can any of the company-specific risk be diversified away by investing in both Guangzhou Seagull and Poly Real 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 Poly Real 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 Poly Real Estate, you can compare the effects of market volatilities on Guangzhou Seagull and Poly Real 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 Poly Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Seagull and Poly Real.

Diversification Opportunities for Guangzhou Seagull and Poly Real

0.02

Correlation Coefficient

Guangzhou Seagull  Poly Real

Significant diversification

The 3 months correlation between Guangzhou and Poly is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Seagull Kitchen and Poly Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poly Real Estate 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 Poly Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poly Real Estate has no effect on the direction of Guangzhou Seagull i.e., Guangzhou Seagull and Poly Real go up and down completely randomly.

Pair Corralation between Guangzhou Seagull and Poly Real

Assuming the 90 days trading horizon Guangzhou Seagull Kitchen is expected to generate 1.37 times more return on investment than Poly Real. However, Guangzhou Seagull is 1.37 times more volatile than Poly Real Estate. It trades about 0.04 of its potential returns per unit of risk. Poly Real Estate is currently generating about -0.12 per unit of risk. If you would invest  278.00  in Guangzhou Seagull Kitchen on October 11, 2024 and sell it today you would earn a total of  14.00  from holding Guangzhou Seagull Kitchen or generate 5.04% return on investment over 90 days.

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

Guangzhou Seagull Kitchen  vs.  Poly Real Estate

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

3 of 100

Very Weak

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

Poly Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poly Real Estate 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 Guangzhou Seagull and Poly Real

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

The idea behind Guangzhou Seagull Kitchen and Poly Real Estate 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.