Correlation Between Guangzhou KingTeller and Zhejiang Crystal

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

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

Diversification Opportunities for Guangzhou KingTeller and Zhejiang Crystal

0.67

Correlation Coefficient

Guangzhou KingTeller  Zhejiang Crystal

Poor diversification

The 3 months correlation between Guangzhou and Zhejiang is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou KingTeller Technolog and Zhejiang Crystal Optech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Crystal Optech and Guangzhou KingTeller 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 KingTeller Technology are associated (or correlated) with Zhejiang Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Crystal Optech has no effect on the direction of Guangzhou KingTeller i.e., Guangzhou KingTeller and Zhejiang Crystal go up and down completely randomly.

Pair Corralation between Guangzhou KingTeller and Zhejiang Crystal

Assuming the 90 days trading horizon Guangzhou KingTeller is expected to generate 1.34 times less return on investment than Zhejiang Crystal. In addition to that, Guangzhou KingTeller is 1.4 times more volatile than Zhejiang Crystal Optech. It trades about 0.05 of its total potential returns per unit of risk. Zhejiang Crystal Optech is currently generating about 0.1 per unit of volatility. If you would invest  1,883  in Zhejiang Crystal Optech on September 30, 2024 and sell it today you would earn a total of  372.00  from holding Zhejiang Crystal Optech or generate 19.76% return on investment over 90 days.

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

Guangzhou KingTeller Technolog  vs.  Zhejiang Crystal Optech

Guangzhou KingTeller

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KingTeller Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou KingTeller sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Crystal Optech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Crystal Optech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Crystal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou KingTeller and Zhejiang Crystal

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

The idea behind Guangzhou KingTeller Technology and Zhejiang Crystal Optech 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.