Correlation Between Guangdong Shenglu and Jilin Jlu

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

Diversification Opportunities for Guangdong Shenglu and Jilin Jlu

0.93

Correlation Coefficient

Guangdong Shenglu  Jilin Jlu

Almost no diversification

The 3 months correlation between Guangdong and Jilin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu 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 Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Jilin Jlu go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Jilin Jlu

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Jilin Jlu. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Shenglu Telecommunication is 1.08 times less risky than Jilin Jlu. The stock trades about 0.0 of its potential returns per unit of risk. The Jilin Jlu Communication is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  938.00  in Jilin Jlu Communication on September 22, 2024 and sell it today you would earn a total of  48.00  from holding Jilin Jlu Communication or generate 5.12% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Jilin Jlu Communication

Guangdong Shenglu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Shenglu sustained solid returns over the last few months and may actually be approaching a breakup point.

Jilin Jlu Communication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Jlu Communication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Jlu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Shenglu and Jilin Jlu

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

The idea behind Guangdong Shenglu Telecommunication and Jilin Jlu 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.