Correlation Between Guangdong Jingyi and Shuhua Sports

Can any of the company-specific risk be diversified away by investing in both Guangdong Jingyi and Shuhua Sports 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 Shuhua Sports 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 Shuhua Sports Co, you can compare the effects of market volatilities on Guangdong Jingyi and Shuhua Sports 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 Shuhua Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and Shuhua Sports.

Diversification Opportunities for Guangdong Jingyi and Shuhua Sports

0.91

Correlation Coefficient

Guangdong Jingyi  Shuhua Sports

Almost no diversification

The 3 months correlation between Guangdong and Shuhua is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports 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 Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and Shuhua Sports go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and Shuhua Sports

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to generate 1.2 times more return on investment than Shuhua Sports. However, Guangdong Jingyi is 1.2 times more volatile than Shuhua Sports Co. It trades about 0.01 of its potential returns per unit of risk. Shuhua Sports Co is currently generating about 0.0 per unit of risk. If you would invest  782.00  in Guangdong Jingyi Metal on September 20, 2024 and sell it today you would lose (26.00) from holding Guangdong Jingyi Metal or give up 3.32% of portfolio value over 90 days.

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

Guangdong Jingyi Metal  vs.  Shuhua Sports Co

Guangdong Jingyi Metal

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 21 (%) 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.

Shuhua Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Jingyi and Shuhua Sports

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

The idea behind Guangdong Jingyi Metal and Shuhua Sports Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.