Correlation Between Guangzhou Zhujiang and Sino Platinum

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

Diversification Opportunities for Guangzhou Zhujiang and Sino Platinum

-0.32

Correlation Coefficient

Guangzhou Zhujiang  Sino Platinum

Very good diversification

The 3 months correlation between Guangzhou and Sino is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Sino Platinum Metals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Platinum Metals 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 Sino Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Platinum Metals has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Sino Platinum go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and Sino Platinum

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to under-perform the Sino Platinum. In addition to that, Guangzhou Zhujiang is 1.16 times more volatile than Sino Platinum Metals Co. It trades about -0.04 of its total potential returns per unit of risk. Sino Platinum Metals Co is currently generating about -0.03 per unit of volatility. If you would invest  1,407  in Sino Platinum Metals Co on October 24, 2024 and sell it today you would lose (43.00) from holding Sino Platinum Metals Co or give up 3.06% of portfolio value over 90 days.

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

Guangzhou Zhujiang Brewery  vs.  Sino Platinum Metals Co

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.

Sino Platinum Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Platinum Metals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sino Platinum 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 Sino Platinum

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

The idea behind Guangzhou Zhujiang Brewery and Sino Platinum Metals Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.