Correlation Between Shenzhen Noposion and Guotai Epoint

Can any of the company-specific risk be diversified away by investing in both Shenzhen Noposion and Guotai Epoint 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 Shenzhen Noposion and Guotai Epoint into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Noposion Agrochemicals and Guotai Epoint Software, you can compare the effects of market volatilities on Shenzhen Noposion and Guotai Epoint 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 Shenzhen Noposion with a short position of Guotai Epoint. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Noposion and Guotai Epoint.

Diversification Opportunities for Shenzhen Noposion and Guotai Epoint

-0.65

Correlation Coefficient

Shenzhen Noposion  Guotai Epoint

Excellent diversification

The 3 months correlation between Shenzhen and Guotai is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Noposion Agrochemical and Guotai Epoint Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Epoint Software and Shenzhen Noposion 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 Shenzhen Noposion Agrochemicals are associated (or correlated) with Guotai Epoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Epoint Software has no effect on the direction of Shenzhen Noposion i.e., Shenzhen Noposion and Guotai Epoint go up and down completely randomly.

Pair Corralation between Shenzhen Noposion and Guotai Epoint

Assuming the 90 days trading horizon Shenzhen Noposion Agrochemicals is expected to under-perform the Guotai Epoint. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Noposion Agrochemicals is 1.35 times less risky than Guotai Epoint. The stock trades about -0.11 of its potential returns per unit of risk. The Guotai Epoint Software is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,043  in Guotai Epoint Software on December 26, 2024 and sell it today you would earn a total of  171.00  from holding Guotai Epoint Software or generate 5.62% return on investment over 90 days.

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

Shenzhen Noposion Agrochemical  vs.  Guotai Epoint Software

Shenzhen Noposion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Noposion Agrochemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guotai Epoint Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guotai Epoint Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guotai Epoint may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen Noposion and Guotai Epoint

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

The idea behind Shenzhen Noposion Agrochemicals and Guotai Epoint Software 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 Stocks Directory module to find actively traded stocks across global markets.