Correlation Between Hainan Shuangcheng and Guangdong Transtek

Can any of the company-specific risk be diversified away by investing in both Hainan Shuangcheng and Guangdong Transtek 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 Hainan Shuangcheng and Guangdong Transtek into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hainan Shuangcheng Pharmaceut and Guangdong Transtek Medical, you can compare the effects of market volatilities on Hainan Shuangcheng and Guangdong Transtek 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 Hainan Shuangcheng with a short position of Guangdong Transtek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Shuangcheng and Guangdong Transtek.

Diversification Opportunities for Hainan Shuangcheng and Guangdong Transtek

-0.21

Correlation Coefficient

Hainan Shuangcheng  Guangdong Transtek

Very good diversification

The 3 months correlation between Hainan and Guangdong is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Shuangcheng Pharmaceut and Guangdong Transtek Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Transtek and Hainan Shuangcheng 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 Hainan Shuangcheng Pharmaceut are associated (or correlated) with Guangdong Transtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Transtek has no effect on the direction of Hainan Shuangcheng i.e., Hainan Shuangcheng and Guangdong Transtek go up and down completely randomly.

Pair Corralation between Hainan Shuangcheng and Guangdong Transtek

Assuming the 90 days trading horizon Hainan Shuangcheng Pharmaceut is expected to under-perform the Guangdong Transtek. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Shuangcheng Pharmaceut is 1.28 times less risky than Guangdong Transtek. The stock trades about -0.27 of its potential returns per unit of risk. The Guangdong Transtek Medical is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,443  in Guangdong Transtek Medical on October 11, 2024 and sell it today you would lose (205.00) from holding Guangdong Transtek Medical or give up 14.21% of portfolio value over 90 days.

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

Hainan Shuangcheng Pharmaceut  vs.  Guangdong Transtek Medical

Hainan Shuangcheng

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Shuangcheng Pharmaceut are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Shuangcheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Transtek

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Transtek Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Transtek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hainan Shuangcheng and Guangdong Transtek

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

The idea behind Hainan Shuangcheng Pharmaceut and Guangdong Transtek Medical 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.