Correlation Between Guangdong Shenglu and Kingclean Electric

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

Diversification Opportunities for Guangdong Shenglu and Kingclean Electric

0.27

Correlation Coefficient

Guangdong Shenglu  Kingclean Electric

Modest diversification

The 3 months correlation between Guangdong and Kingclean is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Kingclean Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingclean Electric 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 Kingclean Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingclean Electric has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Kingclean Electric go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Kingclean Electric

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Kingclean Electric. In addition to that, Guangdong Shenglu is 1.07 times more volatile than Kingclean Electric Co. It trades about -0.02 of its total potential returns per unit of risk. Kingclean Electric Co is currently generating about 0.15 per unit of volatility. If you would invest  2,308  in Kingclean Electric Co on December 27, 2024 and sell it today you would earn a total of  497.00  from holding Kingclean Electric Co or generate 21.53% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Kingclean Electric Co

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 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.

Kingclean Electric

Risk-Adjusted Performance

Good

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

Pair Trading with Guangdong Shenglu and Kingclean Electric

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

The idea behind Guangdong Shenglu Telecommunication and Kingclean Electric Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.