Correlation Between Guangzhou Jointas and Hongfa Technology

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

Diversification Opportunities for Guangzhou Jointas and Hongfa Technology

0.43

Correlation Coefficient

Guangzhou Jointas  Hongfa Technology

Very weak diversification

The 3 months correlation between Guangzhou and Hongfa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jointas Chemical and Hongfa Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongfa Technology 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 Hongfa Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongfa Technology has no effect on the direction of Guangzhou Jointas i.e., Guangzhou Jointas and Hongfa Technology go up and down completely randomly.

Pair Corralation between Guangzhou Jointas and Hongfa Technology

Assuming the 90 days trading horizon Guangzhou Jointas Chemical is expected to under-perform the Hongfa Technology. In addition to that, Guangzhou Jointas is 1.29 times more volatile than Hongfa Technology Co. It trades about -0.04 of its total potential returns per unit of risk. Hongfa Technology Co is currently generating about 0.0 per unit of volatility. If you would invest  3,224  in Hongfa Technology Co on October 5, 2024 and sell it today you would lose (165.00) from holding Hongfa Technology Co or give up 5.12% of portfolio value over 90 days.

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

Guangzhou Jointas Chemical  vs.  Hongfa Technology Co

Guangzhou Jointas

Risk-Adjusted Performance

0 of 100

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.

Hongfa Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongfa Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangzhou Jointas and Hongfa Technology

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

The idea behind Guangzhou Jointas Chemical and Hongfa Technology Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.