Correlation Between Guangdong Shenglu and Tongyu Communication

Can any of the company-specific risk be diversified away by investing in both Guangdong Shenglu and Tongyu Communication 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 Tongyu Communication 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 Tongyu Communication, you can compare the effects of market volatilities on Guangdong Shenglu and Tongyu Communication 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 Tongyu Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and Tongyu Communication.

Diversification Opportunities for Guangdong Shenglu and Tongyu Communication

0.76

Correlation Coefficient

Guangdong Shenglu  Tongyu Communication

Poor diversification

The 3 months correlation between Guangdong and Tongyu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Tongyu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyu Communication 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 Tongyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyu Communication has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Tongyu Communication go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Tongyu Communication

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Tongyu Communication. In addition to that, Guangdong Shenglu is 1.06 times more volatile than Tongyu Communication. It trades about -0.1 of its total potential returns per unit of risk. Tongyu Communication is currently generating about -0.07 per unit of volatility. If you would invest  1,686  in Tongyu Communication on December 1, 2024 and sell it today you would lose (189.00) from holding Tongyu Communication or give up 11.21% of portfolio value over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Tongyu Communication

Guangdong Shenglu

Risk-Adjusted Performance

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 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.

Tongyu Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tongyu Communication 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.

Pair Trading with Guangdong Shenglu and Tongyu Communication

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

The idea behind Guangdong Shenglu Telecommunication and Tongyu Communication 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.