Correlation Between Guangzhou Tinci and Huaxia Fund

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

Diversification Opportunities for Guangzhou Tinci and Huaxia Fund

-0.53

Correlation Coefficient

Guangzhou Tinci  Huaxia Fund

Excellent diversification

The 3 months correlation between Guangzhou and Huaxia is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Guangzhou Tinci i.e., Guangzhou Tinci and Huaxia Fund go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Huaxia Fund

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to generate 4.82 times more return on investment than Huaxia Fund. However, Guangzhou Tinci is 4.82 times more volatile than Huaxia Fund Management. It trades about 0.29 of its potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.23 per unit of risk. If you would invest  1,835  in Guangzhou Tinci Materials on September 4, 2024 and sell it today you would earn a total of  582.00  from holding Guangzhou Tinci Materials or generate 31.72% return on investment over 90 days.

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

Guangzhou Tinci Materials  vs.  Huaxia Fund Management

Guangzhou Tinci Materials

Risk-Adjusted Performance

16 of 100

Solid

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.

Huaxia Fund Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaxia Fund Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huaxia Fund 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 Huaxia Fund

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

The idea behind Guangzhou Tinci Materials and Huaxia Fund Management 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.