Correlation Between Elite Color and Hangzhou Guotai

Can any of the company-specific risk be diversified away by investing in both Elite Color and Hangzhou Guotai 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 Elite Color and Hangzhou Guotai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Color Environmental and Hangzhou Guotai Environmental, you can compare the effects of market volatilities on Elite Color and Hangzhou Guotai 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 Elite Color with a short position of Hangzhou Guotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Hangzhou Guotai.

Diversification Opportunities for Elite Color and Hangzhou Guotai

0.16

Correlation Coefficient

Elite Color  Hangzhou Guotai

Average diversification

The 3 months correlation between Elite and Hangzhou is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi and Elite Color 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 Elite Color Environmental are associated (or correlated) with Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of Elite Color i.e., Elite Color and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between Elite Color and Hangzhou Guotai

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 0.88 times more return on investment than Hangzhou Guotai. However, Elite Color Environmental is 1.14 times less risky than Hangzhou Guotai. It trades about 0.07 of its potential returns per unit of risk. Hangzhou Guotai Environmental is currently generating about 0.06 per unit of risk. If you would invest  621.00  in Elite Color Environmental on December 24, 2024 and sell it today you would earn a total of  41.00  from holding Elite Color Environmental or generate 6.6% return on investment over 90 days.

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

Elite Color Environmental  vs.  Hangzhou Guotai Environmental

Elite Color Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Elite Color may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hangzhou Guotai Envi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Guotai Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Guotai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Elite Color and Hangzhou Guotai

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

The idea behind Elite Color Environmental and Hangzhou Guotai Environmental 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.