Correlation Between Tianshui Huatian and Guangzhou Zhujiang

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

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

Diversification Opportunities for Tianshui Huatian and Guangzhou Zhujiang

0.45

Correlation Coefficient

Tianshui Huatian  Guangzhou Zhujiang

Very weak diversification

The 3 months correlation between Tianshui and Guangzhou is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tianshui Huatian Technology and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang and Tianshui Huatian 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 Tianshui Huatian Technology are associated (or correlated) with Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Tianshui Huatian i.e., Tianshui Huatian and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Tianshui Huatian and Guangzhou Zhujiang

Assuming the 90 days trading horizon Tianshui Huatian is expected to generate 3.06 times less return on investment than Guangzhou Zhujiang. But when comparing it to its historical volatility, Tianshui Huatian Technology is 1.34 times less risky than Guangzhou Zhujiang. It trades about 0.14 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  881.00  in Guangzhou Zhujiang Brewery on September 26, 2024 and sell it today you would earn a total of  105.00  from holding Guangzhou Zhujiang Brewery or generate 11.92% return on investment over 90 days.

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

Tianshui Huatian Technology  vs.  Guangzhou Zhujiang Brewery

Tianshui Huatian Tec

Risk-Adjusted Performance

15 of 100

Solid

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

Guangzhou Zhujiang

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Zhujiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianshui Huatian and Guangzhou Zhujiang

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

The idea behind Tianshui Huatian Technology and Guangzhou Zhujiang Brewery 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.