Correlation Between Guangdong Jingyi and Road Environment

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

Diversification Opportunities for Guangdong Jingyi and Road Environment

0.42

Correlation Coefficient

Guangdong Jingyi  Road Environment

Very weak diversification

The 3 months correlation between Guangdong and Road is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and Road Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Road Environment Tec 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 Road Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Road Environment Tec has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and Road Environment go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and Road Environment

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to generate 0.87 times more return on investment than Road Environment. However, Guangdong Jingyi Metal is 1.15 times less risky than Road Environment. It trades about 0.13 of its potential returns per unit of risk. Road Environment Technology is currently generating about 0.0 per unit of risk. If you would invest  671.00  in Guangdong Jingyi Metal on December 25, 2024 and sell it today you would earn a total of  108.00  from holding Guangdong Jingyi Metal or generate 16.1% return on investment over 90 days.

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

Guangdong Jingyi Metal  vs.  Road Environment Technology

Guangdong Jingyi Metal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 10 (%) 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.

Road Environment Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Road Environment Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Road Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Jingyi and Road Environment

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

The idea behind Guangdong Jingyi Metal and Road Environment Technology 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.