Correlation Between Guangzhou Zhujiang and Jiangnan Mould

Can any of the company-specific risk be diversified away by investing in both Guangzhou Zhujiang and Jiangnan Mould 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 Guangzhou Zhujiang and Jiangnan Mould into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Zhujiang Brewery and Jiangnan Mould Plastic, you can compare the effects of market volatilities on Guangzhou Zhujiang and Jiangnan Mould 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 Guangzhou Zhujiang with a short position of Jiangnan Mould. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Zhujiang and Jiangnan Mould.

Diversification Opportunities for Guangzhou Zhujiang and Jiangnan Mould

-0.2

Correlation Coefficient

Guangzhou Zhujiang  Jiangnan Mould

Good diversification

The 3 months correlation between Guangzhou and Jiangnan is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Jiangnan Mould Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangnan Mould Plastic and Guangzhou Zhujiang 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 Guangzhou Zhujiang Brewery are associated (or correlated) with Jiangnan Mould. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangnan Mould Plastic has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Jiangnan Mould go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and Jiangnan Mould

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to under-perform the Jiangnan Mould. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Zhujiang Brewery is 1.57 times less risky than Jiangnan Mould. The stock trades about -0.04 of its potential returns per unit of risk. The Jiangnan Mould Plastic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  658.00  in Jiangnan Mould Plastic on October 23, 2024 and sell it today you would earn a total of  63.00  from holding Jiangnan Mould Plastic or generate 9.57% return on investment over 90 days.

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

Guangzhou Zhujiang Brewery  vs.  Jiangnan Mould Plastic

Guangzhou Zhujiang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Zhujiang Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou Zhujiang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangnan Mould Plastic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangnan Mould Plastic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangnan Mould may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangzhou Zhujiang and Jiangnan Mould

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

The idea behind Guangzhou Zhujiang Brewery and Jiangnan Mould Plastic 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.