Correlation Between Guangzhou Haige and Yunnan Yuntianhua

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

Diversification Opportunities for Guangzhou Haige and Yunnan Yuntianhua

0.72

Correlation Coefficient

Guangzhou Haige  Yunnan Yuntianhua

Poor diversification

The 3 months correlation between Guangzhou and Yunnan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Yunnan Yuntianhua Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Yuntianhua 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 Yunnan Yuntianhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Yuntianhua has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Yunnan Yuntianhua go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Yunnan Yuntianhua

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to under-perform the Yunnan Yuntianhua. In addition to that, Guangzhou Haige is 1.85 times more volatile than Yunnan Yuntianhua Co. It trades about -0.08 of its total potential returns per unit of risk. Yunnan Yuntianhua Co is currently generating about 0.03 per unit of volatility. If you would invest  2,227  in Yunnan Yuntianhua Co on September 20, 2024 and sell it today you would earn a total of  19.00  from holding Yunnan Yuntianhua Co or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Guangzhou Haige Communications  vs.  Yunnan Yuntianhua Co

Guangzhou Haige Comm

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 13 (%) 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.

Yunnan Yuntianhua

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Yuntianhua Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Yuntianhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Haige and Yunnan Yuntianhua

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

The idea behind Guangzhou Haige Communications and Yunnan Yuntianhua 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.