Correlation Between Guangzhou Haige and Qingdao Baheal

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

Diversification Opportunities for Guangzhou Haige and Qingdao Baheal

0.85

Correlation Coefficient

Guangzhou Haige  Qingdao Baheal

Very poor diversification

The 3 months correlation between Guangzhou and Qingdao is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Qingdao Baheal Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Baheal Medical 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 Qingdao Baheal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Baheal Medical has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Qingdao Baheal go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Qingdao Baheal

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to generate 0.76 times more return on investment than Qingdao Baheal. However, Guangzhou Haige Communications is 1.31 times less risky than Qingdao Baheal. It trades about 0.24 of its potential returns per unit of risk. Qingdao Baheal Medical is currently generating about 0.13 per unit of risk. If you would invest  822.00  in Guangzhou Haige Communications on September 14, 2024 and sell it today you would earn a total of  461.00  from holding Guangzhou Haige Communications or generate 56.08% return on investment over 90 days.

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

Guangzhou Haige Communications  vs.  Qingdao Baheal Medical

Guangzhou Haige Comm

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Qingdao Baheal Medical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Baheal Medical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Baheal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Haige and Qingdao Baheal

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

The idea behind Guangzhou Haige Communications and Qingdao Baheal Medical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.