Correlation Between XinJiang GuoTong and Guangzhou Haige

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Can any of the company-specific risk be diversified away by investing in both XinJiang GuoTong and Guangzhou Haige 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 XinJiang GuoTong and Guangzhou Haige into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XinJiang GuoTong Pipeline and Guangzhou Haige Communications, you can compare the effects of market volatilities on XinJiang GuoTong and Guangzhou Haige 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 XinJiang GuoTong with a short position of Guangzhou Haige. Check out your portfolio center. Please also check ongoing floating volatility patterns of XinJiang GuoTong and Guangzhou Haige.

Diversification Opportunities for XinJiang GuoTong and Guangzhou Haige

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between XinJiang and Guangzhou is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding XinJiang GuoTong Pipeline and Guangzhou Haige Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haige Comm and XinJiang GuoTong 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 XinJiang GuoTong Pipeline are associated (or correlated) with Guangzhou Haige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haige Comm has no effect on the direction of XinJiang GuoTong i.e., XinJiang GuoTong and Guangzhou Haige go up and down completely randomly.

Pair Corralation between XinJiang GuoTong and Guangzhou Haige

Assuming the 90 days trading horizon XinJiang GuoTong Pipeline is expected to generate 0.99 times more return on investment than Guangzhou Haige. However, XinJiang GuoTong Pipeline is 1.01 times less risky than Guangzhou Haige. It trades about 0.2 of its potential returns per unit of risk. Guangzhou Haige Communications is currently generating about 0.19 per unit of risk. If you would invest  638.00  in XinJiang GuoTong Pipeline on September 6, 2024 and sell it today you would earn a total of  287.00  from holding XinJiang GuoTong Pipeline or generate 44.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

XinJiang GuoTong Pipeline  vs.  Guangzhou Haige Communications

 Performance 
       Timeline  
XinJiang GuoTong Pipeline 

Risk-Adjusted Performance

15 of 100

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

Risk-Adjusted Performance

15 of 100

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

XinJiang GuoTong and Guangzhou Haige Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XinJiang GuoTong and Guangzhou Haige

The main advantage of trading using opposite XinJiang GuoTong and Guangzhou Haige positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XinJiang GuoTong position performs unexpectedly, Guangzhou Haige 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 Haige will offset losses from the drop in Guangzhou Haige's long position.
The idea behind XinJiang GuoTong Pipeline and Guangzhou Haige Communications 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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