Correlation Between New Hope and Guilin Seamild

Can any of the company-specific risk be diversified away by investing in both New Hope and Guilin Seamild 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 New Hope and Guilin Seamild into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Hope Dairy and Guilin Seamild Foods, you can compare the effects of market volatilities on New Hope and Guilin Seamild 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 New Hope with a short position of Guilin Seamild. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Hope and Guilin Seamild.

Diversification Opportunities for New Hope and Guilin Seamild

0.08

Correlation Coefficient

New Hope  Guilin Seamild

Significant diversification

The 3 months correlation between New and Guilin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and New Hope 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 New Hope Dairy are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of New Hope i.e., New Hope and Guilin Seamild go up and down completely randomly.

Pair Corralation between New Hope and Guilin Seamild

Assuming the 90 days trading horizon New Hope Dairy is expected to generate 1.28 times more return on investment than Guilin Seamild. However, New Hope is 1.28 times more volatile than Guilin Seamild Foods. It trades about 0.02 of its potential returns per unit of risk. Guilin Seamild Foods is currently generating about 0.01 per unit of risk. If you would invest  1,421  in New Hope Dairy on December 25, 2024 and sell it today you would earn a total of  25.00  from holding New Hope Dairy or generate 1.76% return on investment over 90 days.

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

New Hope Dairy  vs.  Guilin Seamild Foods

New Hope Dairy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, New Hope is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guilin Seamild Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with New Hope and Guilin Seamild

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

The idea behind New Hope Dairy and Guilin Seamild Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.