Correlation Between Guosheng Financial and WuXi AppTec

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

Diversification Opportunities for Guosheng Financial and WuXi AppTec

0.63

Correlation Coefficient

Guosheng Financial  WuXi AppTec

Poor diversification

The 3 months correlation between Guosheng and WuXi is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Guosheng Financial Holding and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec 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 WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of Guosheng Financial i.e., Guosheng Financial and WuXi AppTec go up and down completely randomly.

Pair Corralation between Guosheng Financial and WuXi AppTec

Assuming the 90 days trading horizon Guosheng Financial Holding is expected to generate 5.06 times more return on investment than WuXi AppTec. However, Guosheng Financial is 5.06 times more volatile than WuXi AppTec Co. It trades about 0.0 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about -0.46 per unit of risk. If you would invest  1,307  in Guosheng Financial Holding on October 8, 2024 and sell it today you would lose (55.00) from holding Guosheng Financial Holding or give up 4.21% of portfolio value over 90 days.

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

Guosheng Financial Holding  vs.  WuXi AppTec Co

Guosheng Financial

Risk-Adjusted Performance

0 of 100

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.

WuXi AppTec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WuXi AppTec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guosheng Financial and WuXi AppTec

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

The idea behind Guosheng Financial Holding and WuXi AppTec 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.