Correlation Between Gan Yuan and Zhongshan Broad

Can any of the company-specific risk be diversified away by investing in both Gan Yuan and Zhongshan Broad 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 Gan Yuan and Zhongshan Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gan Yuan Foods and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on Gan Yuan and Zhongshan Broad 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 Gan Yuan with a short position of Zhongshan Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gan Yuan and Zhongshan Broad.

Diversification Opportunities for Gan Yuan and Zhongshan Broad

0.9

Correlation Coefficient

Gan Yuan  Zhongshan Broad

Almost no diversification

The 3 months correlation between Gan and Zhongshan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Gan Yuan 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 Gan Yuan Foods are associated (or correlated) with Zhongshan Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Gan Yuan i.e., Gan Yuan and Zhongshan Broad go up and down completely randomly.

Pair Corralation between Gan Yuan and Zhongshan Broad

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 1.4 times more return on investment than Zhongshan Broad. However, Gan Yuan is 1.4 times more volatile than Zhongshan Broad Ocean Motor. It trades about 0.03 of its potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.03 per unit of risk. If you would invest  7,070  in Gan Yuan Foods on September 20, 2024 and sell it today you would earn a total of  1,362  from holding Gan Yuan Foods or generate 19.26% return on investment over 90 days.

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

Gan Yuan Foods  vs.  Zhongshan Broad Ocean Motor

Gan Yuan Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gan Yuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongshan Broad Ocean

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gan Yuan and Zhongshan Broad

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

The idea behind Gan Yuan Foods and Zhongshan Broad Ocean Motor 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.