Correlation Between Guangdong Shenglu and UE Furniture

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

Diversification Opportunities for Guangdong Shenglu and UE Furniture

0.68

Correlation Coefficient

Guangdong Shenglu  UE Furniture

Poor diversification

The 3 months correlation between Guangdong and 603600 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture 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 UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and UE Furniture go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and UE Furniture

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to generate 1.21 times more return on investment than UE Furniture. However, Guangdong Shenglu is 1.21 times more volatile than UE Furniture Co. It trades about 0.07 of its potential returns per unit of risk. UE Furniture Co is currently generating about 0.05 per unit of risk. If you would invest  559.00  in Guangdong Shenglu Telecommunication on September 30, 2024 and sell it today you would earn a total of  133.00  from holding Guangdong Shenglu Telecommunication or generate 23.79% 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.  UE Furniture Co

Guangdong Shenglu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Shenglu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UE Furniture

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Guangdong Shenglu Telecommunication and UE Furniture 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.