Correlation Between Bus Online and Guosheng Financial

Can any of the company-specific risk be diversified away by investing in both Bus Online and Guosheng Financial 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 Bus Online and Guosheng Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bus Online Co and Guosheng Financial Holding, you can compare the effects of market volatilities on Bus Online and Guosheng Financial 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 Bus Online with a short position of Guosheng Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bus Online and Guosheng Financial.

Diversification Opportunities for Bus Online and Guosheng Financial

0.67

Correlation Coefficient

Bus Online  Guosheng Financial

Poor diversification

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

Pair Corralation between Bus Online and Guosheng Financial

Assuming the 90 days trading horizon Bus Online Co is expected to under-perform the Guosheng Financial. In addition to that, Bus Online is 1.04 times more volatile than Guosheng Financial Holding. It trades about -0.02 of its total potential returns per unit of risk. Guosheng Financial Holding is currently generating about 0.06 per unit of volatility. If you would invest  886.00  in Guosheng Financial Holding on October 2, 2024 and sell it today you would earn a total of  423.00  from holding Guosheng Financial Holding or generate 47.74% return on investment over 90 days.

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

Bus Online Co  vs.  Guosheng Financial Holding

Bus Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bus Online Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Guosheng Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guosheng Financial Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guosheng Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bus Online and Guosheng Financial

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

The idea behind Bus Online Co and Guosheng Financial Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..