Correlation Between Guangzhou Zhujiang and CGN Nuclear

Can any of the company-specific risk be diversified away by investing in both Guangzhou Zhujiang and CGN Nuclear 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 CGN Nuclear 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 CGN Nuclear Technology, you can compare the effects of market volatilities on Guangzhou Zhujiang and CGN Nuclear 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 CGN Nuclear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Zhujiang and CGN Nuclear.

Diversification Opportunities for Guangzhou Zhujiang and CGN Nuclear

0.58

Correlation Coefficient

Guangzhou Zhujiang  CGN Nuclear

Very weak diversification

The 3 months correlation between Guangzhou and CGN is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and CGN Nuclear Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Nuclear Technology 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 CGN Nuclear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Nuclear Technology has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and CGN Nuclear go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and CGN Nuclear

Assuming the 90 days trading horizon Guangzhou Zhujiang is expected to generate 2.94 times less return on investment than CGN Nuclear. But when comparing it to its historical volatility, Guangzhou Zhujiang Brewery is 1.18 times less risky than CGN Nuclear. It trades about 0.09 of its potential returns per unit of risk. CGN Nuclear Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  585.00  in CGN Nuclear Technology on September 13, 2024 and sell it today you would earn a total of  225.00  from holding CGN Nuclear Technology or generate 38.46% return on investment over 90 days.

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

Guangzhou Zhujiang Brewery  vs.  CGN Nuclear Technology

Guangzhou Zhujiang

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Zhujiang sustained solid returns over the last few months and may actually be approaching a breakup point.

CGN Nuclear Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CGN Nuclear Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CGN Nuclear sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Zhujiang and CGN Nuclear

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

The idea behind Guangzhou Zhujiang Brewery and CGN Nuclear Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.