Correlation Between Gan Yuan and Shandong Rike

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

Diversification Opportunities for Gan Yuan and Shandong Rike

0.13

Correlation Coefficient

Gan Yuan  Shandong Rike

Average diversification

The 3 months correlation between Gan and Shandong is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Shandong Rike Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Rike Chemical 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 Shandong Rike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Rike Chemical has no effect on the direction of Gan Yuan i.e., Gan Yuan and Shandong Rike go up and down completely randomly.

Pair Corralation between Gan Yuan and Shandong Rike

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 0.95 times more return on investment than Shandong Rike. However, Gan Yuan Foods is 1.05 times less risky than Shandong Rike. It trades about 0.02 of its potential returns per unit of risk. Shandong Rike Chemical is currently generating about 0.0 per unit of risk. If you would invest  7,858  in Gan Yuan Foods on October 24, 2024 and sell it today you would earn a total of  1,274  from holding Gan Yuan Foods or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Gan Yuan Foods  vs.  Shandong Rike Chemical

Gan Yuan Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 13 (%) 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.

Shandong Rike Chemical

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Gan Yuan and Shandong Rike

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

The idea behind Gan Yuan Foods and Shandong Rike Chemical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.