Correlation Between Guizhou Chanhen and Fujian Oriental

Can any of the company-specific risk be diversified away by investing in both Guizhou Chanhen and Fujian Oriental 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 Guizhou Chanhen and Fujian Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guizhou Chanhen Chemical and Fujian Oriental Silver, you can compare the effects of market volatilities on Guizhou Chanhen and Fujian Oriental 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 Guizhou Chanhen with a short position of Fujian Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guizhou Chanhen and Fujian Oriental.

Diversification Opportunities for Guizhou Chanhen and Fujian Oriental

0.46

Correlation Coefficient

Guizhou Chanhen  Fujian Oriental

Very weak diversification

The 3 months correlation between Guizhou and Fujian is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guizhou Chanhen Chemical and Fujian Oriental Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Oriental Silver and Guizhou Chanhen 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 Guizhou Chanhen Chemical are associated (or correlated) with Fujian Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Oriental Silver has no effect on the direction of Guizhou Chanhen i.e., Guizhou Chanhen and Fujian Oriental go up and down completely randomly.

Pair Corralation between Guizhou Chanhen and Fujian Oriental

Assuming the 90 days trading horizon Guizhou Chanhen Chemical is expected to generate 0.53 times more return on investment than Fujian Oriental. However, Guizhou Chanhen Chemical is 1.9 times less risky than Fujian Oriental. It trades about 0.22 of its potential returns per unit of risk. Fujian Oriental Silver is currently generating about -0.12 per unit of risk. If you would invest  2,212  in Guizhou Chanhen Chemical on September 29, 2024 and sell it today you would earn a total of  202.00  from holding Guizhou Chanhen Chemical or generate 9.13% return on investment over 90 days.

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

Guizhou Chanhen Chemical  vs.  Fujian Oriental Silver

Guizhou Chanhen Chemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guizhou Chanhen Chemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guizhou Chanhen sustained solid returns over the last few months and may actually be approaching a breakup point.

Fujian Oriental Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Oriental Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guizhou Chanhen and Fujian Oriental

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

The idea behind Guizhou Chanhen Chemical and Fujian Oriental Silver 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.