Correlation Between Guangzhou Tinci and Anhui Gujing

Can any of the company-specific risk be diversified away by investing in both Guangzhou Tinci and Anhui Gujing 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 Guangzhou Tinci and Anhui Gujing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Tinci Materials and Anhui Gujing Distillery, you can compare the effects of market volatilities on Guangzhou Tinci and Anhui Gujing 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 Guangzhou Tinci with a short position of Anhui Gujing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Tinci and Anhui Gujing.

Diversification Opportunities for Guangzhou Tinci and Anhui Gujing

0.45

Correlation Coefficient

Guangzhou Tinci  Anhui Gujing

Very weak diversification

The 3 months correlation between Guangzhou and Anhui is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery and Guangzhou Tinci 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 Guangzhou Tinci Materials are associated (or correlated) with Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of Guangzhou Tinci i.e., Guangzhou Tinci and Anhui Gujing go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Anhui Gujing

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to under-perform the Anhui Gujing. In addition to that, Guangzhou Tinci is 1.17 times more volatile than Anhui Gujing Distillery. It trades about -0.03 of its total potential returns per unit of risk. Anhui Gujing Distillery is currently generating about 0.03 per unit of volatility. If you would invest  17,447  in Anhui Gujing Distillery on December 25, 2024 and sell it today you would earn a total of  305.00  from holding Anhui Gujing Distillery or generate 1.75% return on investment over 90 days.

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

Guangzhou Tinci Materials  vs.  Anhui Gujing Distillery

Guangzhou Tinci Materials

Risk-Adjusted Performance

Very Weak

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

Anhui Gujing Distillery

Risk-Adjusted Performance

Weak

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

Pair Trading with Guangzhou Tinci and Anhui Gujing

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

The idea behind Guangzhou Tinci Materials and Anhui Gujing Distillery 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..