Correlation Between Changchun and GRG Banking

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

By analyzing existing cross correlation between Changchun UP Optotech and GRG Banking Equipment, you can compare the effects of market volatilities on Changchun and GRG Banking 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 Changchun with a short position of GRG Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and GRG Banking.

Diversification Opportunities for Changchun and GRG Banking

0.72

Correlation Coefficient

Changchun  GRG Banking

Poor diversification

The 3 months correlation between Changchun and GRG is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and GRG Banking Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRG Banking Equipment and Changchun 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 Changchun UP Optotech are associated (or correlated) with GRG Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRG Banking Equipment has no effect on the direction of Changchun i.e., Changchun and GRG Banking go up and down completely randomly.

Pair Corralation between Changchun and GRG Banking

Assuming the 90 days trading horizon Changchun is expected to generate 2.17 times less return on investment than GRG Banking. But when comparing it to its historical volatility, Changchun UP Optotech is 1.18 times less risky than GRG Banking. It trades about 0.03 of its potential returns per unit of risk. GRG Banking Equipment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,222  in GRG Banking Equipment on December 26, 2024 and sell it today you would earn a total of  104.00  from holding GRG Banking Equipment or generate 8.51% return on investment over 90 days.

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

Changchun UP Optotech  vs.  GRG Banking Equipment

Changchun UP Optotech

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changchun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GRG Banking Equipment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GRG Banking Equipment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRG Banking may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Changchun and GRG Banking

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

The idea behind Changchun UP Optotech and GRG Banking Equipment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.