Correlation Between Gan Yuan and Sichuan Jinshi

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

Diversification Opportunities for Gan Yuan and Sichuan Jinshi

0.56

Correlation Coefficient

Gan Yuan  Sichuan Jinshi

Very weak diversification

The 3 months correlation between Gan and Sichuan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology 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 Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Gan Yuan i.e., Gan Yuan and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Gan Yuan and Sichuan Jinshi

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 0.93 times more return on investment than Sichuan Jinshi. However, Gan Yuan Foods is 1.08 times less risky than Sichuan Jinshi. It trades about -0.03 of its potential returns per unit of risk. Sichuan Jinshi Technology is currently generating about -0.22 per unit of risk. If you would invest  8,615  in Gan Yuan Foods on October 15, 2024 and sell it today you would lose (186.00) from holding Gan Yuan Foods or give up 2.16% of portfolio value over 90 days.

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

Gan Yuan Foods  vs.  Sichuan Jinshi Technology

Gan Yuan Foods

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 16 (%) 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.

Sichuan Jinshi Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gan Yuan and Sichuan Jinshi

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

The idea behind Gan Yuan Foods and Sichuan Jinshi Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.