Correlation Between Guosheng Financial and Shandong Ruifeng

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

Diversification Opportunities for Guosheng Financial and Shandong Ruifeng

0.47

Correlation Coefficient

Guosheng Financial  Shandong Ruifeng

Very weak diversification

The 3 months correlation between Guosheng and Shandong is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Guosheng Financial Holding and Shandong Ruifeng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Ruifeng Chemical 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 Shandong Ruifeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Ruifeng Chemical has no effect on the direction of Guosheng Financial i.e., Guosheng Financial and Shandong Ruifeng go up and down completely randomly.

Pair Corralation between Guosheng Financial and Shandong Ruifeng

Assuming the 90 days trading horizon Guosheng Financial Holding is expected to under-perform the Shandong Ruifeng. In addition to that, Guosheng Financial is 1.39 times more volatile than Shandong Ruifeng Chemical. It trades about -0.01 of its total potential returns per unit of risk. Shandong Ruifeng Chemical is currently generating about 0.03 per unit of volatility. If you would invest  999.00  in Shandong Ruifeng Chemical on December 27, 2024 and sell it today you would earn a total of  26.00  from holding Shandong Ruifeng Chemical or generate 2.6% return on investment over 90 days.

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

Guosheng Financial Holding  vs.  Shandong Ruifeng Chemical

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.

Shandong Ruifeng Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Ruifeng Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Ruifeng 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 Shandong Ruifeng

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

The idea behind Guosheng Financial Holding and Shandong Ruifeng Chemical 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.