Correlation Between Guangzhou Jointas and Shenzhen Noposion

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

By analyzing existing cross correlation between Guangzhou Jointas Chemical and Shenzhen Noposion Agrochemicals, you can compare the effects of market volatilities on Guangzhou Jointas and Shenzhen Noposion 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 Jointas with a short position of Shenzhen Noposion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Jointas and Shenzhen Noposion.

Diversification Opportunities for Guangzhou Jointas and Shenzhen Noposion

0.94

Correlation Coefficient

Guangzhou Jointas  Shenzhen Noposion

Almost no diversification

The 3 months correlation between Guangzhou and Shenzhen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jointas Chemical and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and Guangzhou Jointas 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 Jointas Chemical are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of Guangzhou Jointas i.e., Guangzhou Jointas and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between Guangzhou Jointas and Shenzhen Noposion

Assuming the 90 days trading horizon Guangzhou Jointas Chemical is expected to generate 1.15 times more return on investment than Shenzhen Noposion. However, Guangzhou Jointas is 1.15 times more volatile than Shenzhen Noposion Agrochemicals. It trades about 0.26 of its potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about 0.29 per unit of risk. If you would invest  377.00  in Guangzhou Jointas Chemical on September 14, 2024 and sell it today you would earn a total of  219.00  from holding Guangzhou Jointas Chemical or generate 58.09% return on investment over 90 days.

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

Guangzhou Jointas Chemical  vs.  Shenzhen Noposion Agrochemical

Guangzhou Jointas

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Noposion

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Jointas and Shenzhen Noposion

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

The idea behind Guangzhou Jointas Chemical and Shenzhen Noposion Agrochemicals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.