Correlation Between Guangzhou Zhujiang and Guosheng Financial

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

Diversification Opportunities for Guangzhou Zhujiang and Guosheng Financial

-0.16

Correlation Coefficient

Guangzhou Zhujiang  Guosheng Financial

Good diversification

The 3 months correlation between Guangzhou and Guosheng is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Guosheng Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guosheng Financial 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 Guosheng Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guosheng Financial has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Guosheng Financial go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and Guosheng Financial

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to generate 0.43 times more return on investment than Guosheng Financial. However, Guangzhou Zhujiang Brewery is 2.31 times less risky than Guosheng Financial. It trades about 0.03 of its potential returns per unit of risk. Guosheng Financial Holding is currently generating about -0.01 per unit of risk. If you would invest  993.00  in Guangzhou Zhujiang Brewery on December 29, 2024 and sell it today you would earn a total of  21.00  from holding Guangzhou Zhujiang Brewery or generate 2.11% 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.  Guosheng Financial Holding

Guangzhou Zhujiang

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Guosheng Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangzhou Zhujiang and Guosheng Financial

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

The idea behind Guangzhou Zhujiang Brewery and Guosheng Financial Holding 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.