Correlation Between Jiangsu Yanghe and Guangdong Brandmax

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

By analyzing existing cross correlation between Jiangsu Yanghe Brewery and Guangdong Brandmax Marketing, you can compare the effects of market volatilities on Jiangsu Yanghe and Guangdong Brandmax 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 Jiangsu Yanghe with a short position of Guangdong Brandmax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangsu Yanghe and Guangdong Brandmax.

Diversification Opportunities for Jiangsu Yanghe and Guangdong Brandmax

-0.15

Correlation Coefficient

Jiangsu Yanghe  Guangdong Brandmax

Good diversification

The 3 months correlation between Jiangsu and Guangdong is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Yanghe Brewery and Guangdong Brandmax Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Brandmax and Jiangsu Yanghe 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 Jiangsu Yanghe Brewery are associated (or correlated) with Guangdong Brandmax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Brandmax has no effect on the direction of Jiangsu Yanghe i.e., Jiangsu Yanghe and Guangdong Brandmax go up and down completely randomly.

Pair Corralation between Jiangsu Yanghe and Guangdong Brandmax

Assuming the 90 days trading horizon Jiangsu Yanghe Brewery is expected to under-perform the Guangdong Brandmax. But the stock apears to be less risky and, when comparing its historical volatility, Jiangsu Yanghe Brewery is 2.63 times less risky than Guangdong Brandmax. The stock trades about -0.07 of its potential returns per unit of risk. The Guangdong Brandmax Marketing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  777.00  in Guangdong Brandmax Marketing on December 2, 2024 and sell it today you would earn a total of  289.00  from holding Guangdong Brandmax Marketing or generate 37.19% return on investment over 90 days.

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

Jiangsu Yanghe Brewery  vs.  Guangdong Brandmax Marketing

Jiangsu Yanghe Brewery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Yanghe Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Guangdong Brandmax

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Brandmax Marketing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Brandmax sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Yanghe and Guangdong Brandmax

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

The idea behind Jiangsu Yanghe Brewery and Guangdong Brandmax Marketing 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.