Correlation Between Guosheng Financial and Shantui Construction

Can any of the company-specific risk be diversified away by investing in both Guosheng Financial and Shantui Construction 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 Guosheng Financial and Shantui Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guosheng Financial Holding and Shantui Construction Machinery, you can compare the effects of market volatilities on Guosheng Financial and Shantui Construction 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 Guosheng Financial with a short position of Shantui Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guosheng Financial and Shantui Construction.

Diversification Opportunities for Guosheng Financial and Shantui Construction

-0.23

Correlation Coefficient

Guosheng Financial  Shantui Construction

Very good diversification

The 3 months correlation between Guosheng and Shantui is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Guosheng Financial Holding and Shantui Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantui Construction and Guosheng Financial 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 Guosheng Financial Holding are associated (or correlated) with Shantui Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantui Construction has no effect on the direction of Guosheng Financial i.e., Guosheng Financial and Shantui Construction go up and down completely randomly.

Pair Corralation between Guosheng Financial and Shantui Construction

Assuming the 90 days trading horizon Guosheng Financial is expected to generate 1.9 times less return on investment than Shantui Construction. In addition to that, Guosheng Financial is 1.06 times more volatile than Shantui Construction Machinery. It trades about 0.01 of its total potential returns per unit of risk. Shantui Construction Machinery is currently generating about 0.02 per unit of volatility. If you would invest  945.00  in Shantui Construction Machinery on December 26, 2024 and sell it today you would earn a total of  7.00  from holding Shantui Construction Machinery or generate 0.74% return on investment over 90 days.

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

Guosheng Financial Holding  vs.  Shantui Construction Machinery

Guosheng Financial

Risk-Adjusted Performance

Very Weak

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

Shantui Construction

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shantui Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guosheng Financial and Shantui Construction

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

The idea behind Guosheng Financial Holding and Shantui Construction Machinery 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.