Correlation Between Guangzhou Zhujiang and Sinomine Resource

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

Diversification Opportunities for Guangzhou Zhujiang and Sinomine Resource

0.18

Correlation Coefficient

Guangzhou Zhujiang  Sinomine Resource

Average diversification

The 3 months correlation between Guangzhou and Sinomine is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Sinomine Resource Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomine Resource 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 Sinomine Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomine Resource has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Sinomine Resource go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and Sinomine Resource

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to generate 0.56 times more return on investment than Sinomine Resource. However, Guangzhou Zhujiang Brewery is 1.8 times less risky than Sinomine Resource. It trades about 0.04 of its potential returns per unit of risk. Sinomine Resource Exploration is currently generating about -0.02 per unit of risk. If you would invest  786.00  in Guangzhou Zhujiang Brewery on October 4, 2024 and sell it today you would earn a total of  203.00  from holding Guangzhou Zhujiang Brewery or generate 25.83% return on investment over 90 days.

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

Guangzhou Zhujiang Brewery  vs.  Sinomine Resource Exploration

Guangzhou Zhujiang

Risk-Adjusted Performance

2 of 100

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.

Sinomine Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinomine Resource Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinomine Resource 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 Sinomine Resource

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

The idea behind Guangzhou Zhujiang Brewery and Sinomine Resource Exploration 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.