Correlation Between Guangzhou Jointas and Westone Information

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

Diversification Opportunities for Guangzhou Jointas and Westone Information

0.82

Correlation Coefficient

Guangzhou Jointas  Westone Information

Very poor diversification

The 3 months correlation between Guangzhou and Westone is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jointas Chemical and Westone Information Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westone Information 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 Westone Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westone Information has no effect on the direction of Guangzhou Jointas i.e., Guangzhou Jointas and Westone Information go up and down completely randomly.

Pair Corralation between Guangzhou Jointas and Westone Information

Assuming the 90 days trading horizon Guangzhou Jointas is expected to generate 1.11 times less return on investment than Westone Information. But when comparing it to its historical volatility, Guangzhou Jointas Chemical is 1.1 times less risky than Westone Information. It trades about 0.12 of its potential returns per unit of risk. Westone Information Industry is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,221  in Westone Information Industry on December 10, 2024 and sell it today you would earn a total of  562.00  from holding Westone Information Industry or generate 46.03% return on investment over 90 days.

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

Guangzhou Jointas Chemical  vs.  Westone Information Industry

Guangzhou Jointas

Risk-Adjusted Performance

Very Weak

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

Westone Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westone Information Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Westone Information 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 Jointas and Westone Information

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

The idea behind Guangzhou Jointas Chemical and Westone Information Industry 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.