Correlation Between Guangzhou Tinci and Changshu Ruite

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

Diversification Opportunities for Guangzhou Tinci and Changshu Ruite

0.81

Correlation Coefficient

Guangzhou Tinci  Changshu Ruite

Very poor diversification

The 3 months correlation between Guangzhou and Changshu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Changshu Ruite Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changshu Ruite Electric 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 Changshu Ruite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changshu Ruite Electric has no effect on the direction of Guangzhou Tinci i.e., Guangzhou Tinci and Changshu Ruite go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Changshu Ruite

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to under-perform the Changshu Ruite. In addition to that, Guangzhou Tinci is 1.46 times more volatile than Changshu Ruite Electric. It trades about -0.09 of its total potential returns per unit of risk. Changshu Ruite Electric is currently generating about 0.19 per unit of volatility. If you would invest  725.00  in Changshu Ruite Electric on September 20, 2024 and sell it today you would earn a total of  61.00  from holding Changshu Ruite Electric or generate 8.41% return on investment over 90 days.

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

Guangzhou Tinci Materials  vs.  Changshu Ruite Electric

Guangzhou Tinci Materials

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Tinci Materials are ranked lower than 16 (%) 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.

Changshu Ruite Electric

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Changshu Ruite Electric are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changshu Ruite sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Tinci and Changshu Ruite

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

The idea behind Guangzhou Tinci Materials and Changshu Ruite Electric 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.