Correlation Between Guilin Seamild and Fujian Longzhou

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

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

Diversification Opportunities for Guilin Seamild and Fujian Longzhou

0.52

Correlation Coefficient

Guilin Seamild  Fujian Longzhou

Very weak diversification

The 3 months correlation between Guilin and Fujian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Guilin Seamild Foods and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and Guilin Seamild 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 Guilin Seamild Foods are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Guilin Seamild i.e., Guilin Seamild and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Guilin Seamild and Fujian Longzhou

Assuming the 90 days trading horizon Guilin Seamild is expected to generate 23.62 times less return on investment than Fujian Longzhou. But when comparing it to its historical volatility, Guilin Seamild Foods is 1.12 times less risky than Fujian Longzhou. It trades about 0.01 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Fujian Longzhou Transportation on December 25, 2024 and sell it today you would earn a total of  115.00  from holding Fujian Longzhou Transportation or generate 26.93% return on investment over 90 days.

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

Guilin Seamild Foods  vs.  Fujian Longzhou Transportation

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.

Fujian Longzhou Tran

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guilin Seamild and Fujian Longzhou

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

The idea behind Guilin Seamild Foods and Fujian Longzhou Transportation 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.