Correlation Between Guangzhou Haige and Gansu Huangtai

Can any of the company-specific risk be diversified away by investing in both Guangzhou Haige and Gansu Huangtai 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 Haige and Gansu Huangtai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Haige Communications and Gansu Huangtai Wine marketing, you can compare the effects of market volatilities on Guangzhou Haige and Gansu Huangtai 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 Haige with a short position of Gansu Huangtai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Haige and Gansu Huangtai.

Diversification Opportunities for Guangzhou Haige and Gansu Huangtai

-0.49

Correlation Coefficient

Guangzhou Haige  Gansu Huangtai

Very good diversification

The 3 months correlation between Guangzhou and Gansu is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Gansu Huangtai Wine marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Huangtai Wine and Guangzhou Haige 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 Haige Communications are associated (or correlated) with Gansu Huangtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Huangtai Wine has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Gansu Huangtai go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Gansu Huangtai

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to generate 0.67 times more return on investment than Gansu Huangtai. However, Guangzhou Haige Communications is 1.49 times less risky than Gansu Huangtai. It trades about 0.01 of its potential returns per unit of risk. Gansu Huangtai Wine marketing is currently generating about -0.06 per unit of risk. If you would invest  1,128  in Guangzhou Haige Communications on December 26, 2024 and sell it today you would lose (3.00) from holding Guangzhou Haige Communications or give up 0.27% of portfolio value over 90 days.

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

Guangzhou Haige Communications  vs.  Gansu Huangtai Wine marketing

Guangzhou Haige Comm

Risk-Adjusted Performance

Very Weak

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

Gansu Huangtai Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Huangtai Wine marketing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangzhou Haige and Gansu Huangtai

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

The idea behind Guangzhou Haige Communications and Gansu Huangtai Wine marketing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.