Correlation Between Blue Sail and Guangzhou Hongli

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

By analyzing existing cross correlation between Blue Sail Medical and Guangzhou Hongli Opto, you can compare the effects of market volatilities on Blue Sail and Guangzhou Hongli 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 Blue Sail with a short position of Guangzhou Hongli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and Guangzhou Hongli.

Diversification Opportunities for Blue Sail and Guangzhou Hongli

0.88

Correlation Coefficient

Blue Sail  Guangzhou Hongli

Very poor diversification

The 3 months correlation between Blue and Guangzhou is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Guangzhou Hongli Opto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Hongli Opto and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Guangzhou Hongli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Hongli Opto has no effect on the direction of Blue Sail i.e., Blue Sail and Guangzhou Hongli go up and down completely randomly.

Pair Corralation between Blue Sail and Guangzhou Hongli

Assuming the 90 days trading horizon Blue Sail Medical is expected to generate 1.04 times more return on investment than Guangzhou Hongli. However, Blue Sail is 1.04 times more volatile than Guangzhou Hongli Opto. It trades about 0.17 of its potential returns per unit of risk. Guangzhou Hongli Opto is currently generating about 0.12 per unit of risk. If you would invest  474.00  in Blue Sail Medical on December 11, 2024 and sell it today you would earn a total of  59.00  from holding Blue Sail Medical or generate 12.45% return on investment over 90 days.

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

Blue Sail Medical  vs.  Guangzhou Hongli Opto

Blue Sail Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Sail Medical 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.

Guangzhou Hongli Opto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Hongli Opto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Blue Sail and Guangzhou Hongli

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

The idea behind Blue Sail Medical and Guangzhou Hongli Opto 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.