Correlation Between Guangdong Jingyi and Chongqing Rural

Can any of the company-specific risk be diversified away by investing in both Guangdong Jingyi and Chongqing Rural 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 Guangdong Jingyi and Chongqing Rural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Jingyi Metal and Chongqing Rural Commercial, you can compare the effects of market volatilities on Guangdong Jingyi and Chongqing Rural 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 Guangdong Jingyi with a short position of Chongqing Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and Chongqing Rural.

Diversification Opportunities for Guangdong Jingyi and Chongqing Rural

-0.19

Correlation Coefficient

Guangdong Jingyi  Chongqing Rural

Good diversification

The 3 months correlation between Guangdong and Chongqing is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm and Guangdong Jingyi 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 Guangdong Jingyi Metal are associated (or correlated) with Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and Chongqing Rural go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and Chongqing Rural

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to under-perform the Chongqing Rural. In addition to that, Guangdong Jingyi is 1.92 times more volatile than Chongqing Rural Commercial. It trades about -0.23 of its total potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.14 per unit of volatility. If you would invest  576.00  in Chongqing Rural Commercial on October 11, 2024 and sell it today you would earn a total of  26.00  from holding Chongqing Rural Commercial or generate 4.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Guangdong Jingyi Metal  vs.  Chongqing Rural Commercial

Guangdong Jingyi Metal

Risk-Adjusted Performance

8 of 100

OK

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

Chongqing Rural Comm

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Rural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangdong Jingyi and Chongqing Rural

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

The idea behind Guangdong Jingyi Metal and Chongqing Rural Commercial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.