Correlation Between Guilin Seamild and Suzhou TFC

Can any of the company-specific risk be diversified away by investing in both Guilin Seamild and Suzhou TFC 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 Suzhou TFC 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 Suzhou TFC Optical, you can compare the effects of market volatilities on Guilin Seamild and Suzhou TFC 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 Suzhou TFC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guilin Seamild and Suzhou TFC.

Diversification Opportunities for Guilin Seamild and Suzhou TFC

-0.69

Correlation Coefficient

Guilin Seamild  Suzhou TFC

Excellent diversification

The 3 months correlation between Guilin and Suzhou is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Guilin Seamild Foods and Suzhou TFC Optical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou TFC Optical 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 Suzhou TFC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou TFC Optical has no effect on the direction of Guilin Seamild i.e., Guilin Seamild and Suzhou TFC go up and down completely randomly.

Pair Corralation between Guilin Seamild and Suzhou TFC

Assuming the 90 days trading horizon Guilin Seamild is expected to generate 1.95 times less return on investment than Suzhou TFC. But when comparing it to its historical volatility, Guilin Seamild Foods is 2.05 times less risky than Suzhou TFC. It trades about 0.11 of its potential returns per unit of risk. Suzhou TFC Optical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,823  in Suzhou TFC Optical on October 22, 2024 and sell it today you would earn a total of  1,037  from holding Suzhou TFC Optical or generate 10.56% return on investment over 90 days.

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

Guilin Seamild Foods  vs.  Suzhou TFC Optical

Guilin Seamild Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Suzhou TFC Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzhou TFC Optical 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 Guilin Seamild and Suzhou TFC

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

The idea behind Guilin Seamild Foods and Suzhou TFC Optical 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.