Correlation Between DO Home and Guangzhou KingTeller

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

By analyzing existing cross correlation between DO Home Collection and Guangzhou KingTeller Technology, you can compare the effects of market volatilities on DO Home and Guangzhou KingTeller 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 DO Home with a short position of Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of DO Home and Guangzhou KingTeller.

Diversification Opportunities for DO Home and Guangzhou KingTeller

0.71

Correlation Coefficient

DO Home  Guangzhou KingTeller

Poor diversification

The 3 months correlation between 002798 and Guangzhou is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DO Home Collection and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and DO Home 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 DO Home Collection are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of DO Home i.e., DO Home and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between DO Home and Guangzhou KingTeller

Assuming the 90 days trading horizon DO Home Collection is expected to under-perform the Guangzhou KingTeller. But the stock apears to be less risky and, when comparing its historical volatility, DO Home Collection is 1.16 times less risky than Guangzhou KingTeller. The stock trades about -0.03 of its potential returns per unit of risk. The Guangzhou KingTeller Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Guangzhou KingTeller Technology on October 24, 2024 and sell it today you would earn a total of  173.00  from holding Guangzhou KingTeller Technology or generate 55.81% return on investment over 90 days.

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

DO Home Collection  vs.  Guangzhou KingTeller Technolog

DO Home Collection

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guangzhou KingTeller

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KingTeller Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou KingTeller sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DO Home and Guangzhou KingTeller

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

The idea behind DO Home Collection and Guangzhou KingTeller Technology 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.