Correlation Between Guangzhou Haige and Huaxia Fund

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

Diversification Opportunities for Guangzhou Haige and Huaxia Fund

-0.33

Correlation Coefficient

Guangzhou Haige  Huaxia Fund

Very good diversification

The 3 months correlation between Guangzhou and Huaxia is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Huaxia Fund go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Huaxia Fund

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to generate 3.44 times more return on investment than Huaxia Fund. However, Guangzhou Haige is 3.44 times more volatile than Huaxia Fund Management. It trades about 0.21 of its potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.06 per unit of risk. If you would invest  822.00  in Guangzhou Haige Communications on September 15, 2024 and sell it today you would earn a total of  399.00  from holding Guangzhou Haige Communications or generate 48.54% return on investment over 90 days.

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

Guangzhou Haige Communications  vs.  Huaxia Fund Management

Guangzhou Haige Comm

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 16 (%) 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.

Huaxia Fund Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Huaxia Fund 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 Haige and Huaxia Fund

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

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