Correlation Between Guangdong Shenglu and Kunwu Jiuding

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

Diversification Opportunities for Guangdong Shenglu and Kunwu Jiuding

0.65

Correlation Coefficient

Guangdong Shenglu  Kunwu Jiuding

Poor diversification

The 3 months correlation between Guangdong and Kunwu is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Kunwu Jiuding Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunwu Jiuding Investment 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 Kunwu Jiuding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunwu Jiuding Investment has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Kunwu Jiuding go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Kunwu Jiuding

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to generate 0.89 times more return on investment than Kunwu Jiuding. However, Guangdong Shenglu Telecommunication is 1.12 times less risky than Kunwu Jiuding. It trades about 0.02 of its potential returns per unit of risk. Kunwu Jiuding Investment is currently generating about -0.04 per unit of risk. If you would invest  610.00  in Guangdong Shenglu Telecommunication on October 11, 2024 and sell it today you would earn a total of  10.00  from holding Guangdong Shenglu Telecommunication or generate 1.64% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Kunwu Jiuding Investment

Guangdong Shenglu

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Kunwu Jiuding Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kunwu Jiuding Investment 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 Kunwu Jiuding

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

The idea behind Guangdong Shenglu Telecommunication and Kunwu Jiuding Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.