Correlation Between Guangzhou Tinci and Jiugui Liquor

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

Diversification Opportunities for Guangzhou Tinci and Jiugui Liquor

0.89

Correlation Coefficient

Guangzhou Tinci  Jiugui Liquor

Very poor diversification

The 3 months correlation between Guangzhou and Jiugui is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor 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 Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of Guangzhou Tinci i.e., Guangzhou Tinci and Jiugui Liquor go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Jiugui Liquor

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to generate 1.17 times more return on investment than Jiugui Liquor. However, Guangzhou Tinci is 1.17 times more volatile than Jiugui Liquor Co. It trades about -0.04 of its potential returns per unit of risk. Jiugui Liquor Co is currently generating about -0.06 per unit of risk. If you would invest  4,339  in Guangzhou Tinci Materials on September 26, 2024 and sell it today you would lose (2,233) from holding Guangzhou Tinci Materials or give up 51.46% of portfolio value over 90 days.

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

Guangzhou Tinci Materials  vs.  Jiugui Liquor Co

Guangzhou Tinci Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Tinci Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Tinci sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiugui Liquor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Tinci and Jiugui Liquor

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

The idea behind Guangzhou Tinci Materials and Jiugui Liquor 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.