Correlation Between Guangzhou Seagull and Pengxin International

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

Diversification Opportunities for Guangzhou Seagull and Pengxin International

0.83

Correlation Coefficient

Guangzhou Seagull  Pengxin International

Very poor diversification

The 3 months correlation between Guangzhou and Pengxin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Seagull Kitchen and Pengxin International Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pengxin International 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 Pengxin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pengxin International has no effect on the direction of Guangzhou Seagull i.e., Guangzhou Seagull and Pengxin International go up and down completely randomly.

Pair Corralation between Guangzhou Seagull and Pengxin International

Assuming the 90 days trading horizon Guangzhou Seagull Kitchen is expected to generate 0.92 times more return on investment than Pengxin International. However, Guangzhou Seagull Kitchen is 1.09 times less risky than Pengxin International. It trades about 0.13 of its potential returns per unit of risk. Pengxin International Mining is currently generating about 0.03 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	Strong
Accuracy	100.0%
Values	Daily Returns

Guangzhou Seagull Kitchen  vs.  Pengxin International Mining

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.

Pengxin International

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pengxin International Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pengxin International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Seagull and Pengxin International

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

The idea behind Guangzhou Seagull Kitchen and Pengxin International Mining 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.