Correlation Between Glodon Software and Shandong Hongchuang

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

By analyzing existing cross correlation between Glodon Software Co and Shandong Hongchuang Aluminum, you can compare the effects of market volatilities on Glodon Software and Shandong Hongchuang 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 Glodon Software with a short position of Shandong Hongchuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glodon Software and Shandong Hongchuang.

Diversification Opportunities for Glodon Software and Shandong Hongchuang

0.58

Correlation Coefficient

Glodon Software  Shandong Hongchuang

Very weak diversification

The 3 months correlation between Glodon and Shandong is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Glodon Software Co and Shandong Hongchuang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hongchuang and Glodon Software 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 Glodon Software Co are associated (or correlated) with Shandong Hongchuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hongchuang has no effect on the direction of Glodon Software i.e., Glodon Software and Shandong Hongchuang go up and down completely randomly.

Pair Corralation between Glodon Software and Shandong Hongchuang

Assuming the 90 days trading horizon Glodon Software Co is expected to under-perform the Shandong Hongchuang. In addition to that, Glodon Software is 1.29 times more volatile than Shandong Hongchuang Aluminum. It trades about -0.07 of its total potential returns per unit of risk. Shandong Hongchuang Aluminum is currently generating about 0.1 per unit of volatility. If you would invest  420.00  in Shandong Hongchuang Aluminum on December 27, 2024 and sell it today you would earn a total of  715.00  from holding Shandong Hongchuang Aluminum or generate 170.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Glodon Software Co  vs.  Shandong Hongchuang Aluminum

Glodon Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glodon Software Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Glodon Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Hongchuang

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Hongchuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glodon Software and Shandong Hongchuang

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

The idea behind Glodon Software Co and Shandong Hongchuang Aluminum 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.