Correlation Between Guangzhou Zhujiang and Tianshui Huatian

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

Diversification Opportunities for Guangzhou Zhujiang and Tianshui Huatian

0.45

Correlation Coefficient

Guangzhou Zhujiang  Tianshui Huatian

Very weak diversification

The 3 months correlation between Guangzhou and Tianshui is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec 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 Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Tianshui Huatian go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and Tianshui Huatian

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to generate 1.34 times more return on investment than Tianshui Huatian. However, Guangzhou Zhujiang is 1.34 times more volatile than Tianshui Huatian Technology. It trades about 0.32 of its potential returns per unit of risk. Tianshui Huatian Technology is currently generating about 0.14 per unit of risk. If you would invest  881.00  in Guangzhou Zhujiang Brewery on September 26, 2024 and sell it today you would earn a total of  105.00  from holding Guangzhou Zhujiang Brewery or generate 11.92% 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.  Tianshui Huatian 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.

Tianshui Huatian Tec

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshui Huatian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Zhujiang and Tianshui Huatian

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

The idea behind Guangzhou Zhujiang Brewery and Tianshui Huatian 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.

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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.