Correlation Between Guosheng Financial and Jiangxi Sunshine

Can any of the company-specific risk be diversified away by investing in both Guosheng Financial and Jiangxi Sunshine 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 Jiangxi Sunshine 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 Jiangxi Sunshine Dairy, you can compare the effects of market volatilities on Guosheng Financial and Jiangxi Sunshine 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 Jiangxi Sunshine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guosheng Financial and Jiangxi Sunshine.

Diversification Opportunities for Guosheng Financial and Jiangxi Sunshine

0.74

Correlation Coefficient

Guosheng Financial  Jiangxi Sunshine

Poor diversification

The 3 months correlation between Guosheng and Jiangxi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guosheng Financial Holding and Jiangxi Sunshine Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Sunshine Dairy 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 Jiangxi Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Sunshine Dairy has no effect on the direction of Guosheng Financial i.e., Guosheng Financial and Jiangxi Sunshine go up and down completely randomly.

Pair Corralation between Guosheng Financial and Jiangxi Sunshine

Assuming the 90 days trading horizon Guosheng Financial Holding is expected to generate 1.75 times more return on investment than Jiangxi Sunshine. However, Guosheng Financial is 1.75 times more volatile than Jiangxi Sunshine Dairy. It trades about 0.09 of its potential returns per unit of risk. Jiangxi Sunshine Dairy is currently generating about 0.01 per unit of risk. If you would invest  1,132  in Guosheng Financial Holding on October 24, 2024 and sell it today you would earn a total of  227.00  from holding Guosheng Financial Holding or generate 20.05% return on investment over 90 days.

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

Guosheng Financial Holding  vs.  Jiangxi Sunshine Dairy

Guosheng Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guosheng Financial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guosheng Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Sunshine Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Sunshine Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangxi Sunshine 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 Jiangxi Sunshine

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

The idea behind Guosheng Financial Holding and Jiangxi Sunshine Dairy 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.