Correlation Between Guangdong Shenglu and Zhejiang JIULI

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

By analyzing existing cross correlation between Guangdong Shenglu Telecommunication and Zhejiang JIULI Hi tech, you can compare the effects of market volatilities on Guangdong Shenglu and Zhejiang JIULI 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 Shenglu with a short position of Zhejiang JIULI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and Zhejiang JIULI.

Diversification Opportunities for Guangdong Shenglu and Zhejiang JIULI

0.45

Correlation Coefficient

Guangdong Shenglu  Zhejiang JIULI

Very weak diversification

The 3 months correlation between Guangdong and Zhejiang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Zhejiang JIULI Hi tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang JIULI Hi and Guangdong Shenglu 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 Shenglu Telecommunication are associated (or correlated) with Zhejiang JIULI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang JIULI Hi has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Zhejiang JIULI go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Zhejiang JIULI

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Zhejiang JIULI. In addition to that, Guangdong Shenglu is 1.63 times more volatile than Zhejiang JIULI Hi tech. It trades about -0.03 of its total potential returns per unit of risk. Zhejiang JIULI Hi tech is currently generating about 0.05 per unit of volatility. If you would invest  1,600  in Zhejiang JIULI Hi tech on October 13, 2024 and sell it today you would earn a total of  685.00  from holding Zhejiang JIULI Hi tech or generate 42.81% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Zhejiang JIULI Hi tech

Guangdong Shenglu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhejiang JIULI Hi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang JIULI 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 Shenglu and Zhejiang JIULI

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

The idea behind Guangdong Shenglu Telecommunication and Zhejiang JIULI Hi tech 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.