Correlation Between Tongding Interconnection and Guangxi Wuzhou

Can any of the company-specific risk be diversified away by investing in both Tongding Interconnection and Guangxi Wuzhou 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 Tongding Interconnection and Guangxi Wuzhou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tongding Interconnection Information and Guangxi Wuzhou Communications, you can compare the effects of market volatilities on Tongding Interconnection and Guangxi Wuzhou 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 Tongding Interconnection with a short position of Guangxi Wuzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongding Interconnection and Guangxi Wuzhou.

Diversification Opportunities for Tongding Interconnection and Guangxi Wuzhou

0.07

Correlation Coefficient

Tongding Interconnection  Guangxi Wuzhou

Significant diversification

The 3 months correlation between Tongding and Guangxi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tongding Interconnection Infor and Guangxi Wuzhou Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangxi Wuzhou Commu and Tongding Interconnection 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 Tongding Interconnection Information are associated (or correlated) with Guangxi Wuzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangxi Wuzhou Commu has no effect on the direction of Tongding Interconnection i.e., Tongding Interconnection and Guangxi Wuzhou go up and down completely randomly.

Pair Corralation between Tongding Interconnection and Guangxi Wuzhou

Assuming the 90 days trading horizon Tongding Interconnection is expected to generate 1.85 times less return on investment than Guangxi Wuzhou. In addition to that, Tongding Interconnection is 1.31 times more volatile than Guangxi Wuzhou Communications. It trades about 0.01 of its total potential returns per unit of risk. Guangxi Wuzhou Communications is currently generating about 0.03 per unit of volatility. If you would invest  358.00  in Guangxi Wuzhou Communications on December 2, 2024 and sell it today you would earn a total of  66.00  from holding Guangxi Wuzhou Communications or generate 18.44% return on investment over 90 days.

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

Tongding Interconnection Infor  vs.  Guangxi Wuzhou Communications

Tongding Interconnection

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tongding Interconnection Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongding Interconnection may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Guangxi Wuzhou Commu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangxi Wuzhou Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangxi Wuzhou may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tongding Interconnection and Guangxi Wuzhou

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

The idea behind Tongding Interconnection Information and Guangxi Wuzhou Communications 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.