Correlation Between Guangzhou Jointas and Shenzhen Sunway

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

Diversification Opportunities for Guangzhou Jointas and Shenzhen Sunway

0.62

Correlation Coefficient

Guangzhou Jointas  Shenzhen Sunway

Poor diversification

The 3 months correlation between Guangzhou and Shenzhen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jointas Chemical and Shenzhen Sunway Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunway Comm 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 Sunway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunway Comm has no effect on the direction of Guangzhou Jointas i.e., Guangzhou Jointas and Shenzhen Sunway go up and down completely randomly.

Pair Corralation between Guangzhou Jointas and Shenzhen Sunway

Assuming the 90 days trading horizon Guangzhou Jointas Chemical is expected to generate 1.21 times more return on investment than Shenzhen Sunway. However, Guangzhou Jointas is 1.21 times more volatile than Shenzhen Sunway Communication. It trades about -0.04 of its potential returns per unit of risk. Shenzhen Sunway Communication is currently generating about -0.18 per unit of risk. If you would invest  530.00  in Guangzhou Jointas Chemical on October 11, 2024 and sell it today you would lose (44.00) from holding Guangzhou Jointas Chemical or give up 8.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Guangzhou Jointas Chemical  vs.  Shenzhen Sunway Communication

Guangzhou Jointas

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenzhen Sunway Comm

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Guangzhou Jointas and Shenzhen Sunway

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

The idea behind Guangzhou Jointas Chemical and Shenzhen Sunway Communication 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.