Correlation Between Elite Color and Guangxi Guiguan

Can any of the company-specific risk be diversified away by investing in both Elite Color and Guangxi Guiguan 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 Guangxi Guiguan 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 Guangxi Guiguan Electric, you can compare the effects of market volatilities on Elite Color and Guangxi Guiguan 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 Guangxi Guiguan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Guangxi Guiguan.

Diversification Opportunities for Elite Color and Guangxi Guiguan

0.23

Correlation Coefficient

Elite Color  Guangxi Guiguan

Modest diversification

The 3 months correlation between Elite and Guangxi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Guangxi Guiguan Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangxi Guiguan Electric 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 Guangxi Guiguan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangxi Guiguan Electric has no effect on the direction of Elite Color i.e., Elite Color and Guangxi Guiguan go up and down completely randomly.

Pair Corralation between Elite Color and Guangxi Guiguan

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 1.78 times more return on investment than Guangxi Guiguan. However, Elite Color is 1.78 times more volatile than Guangxi Guiguan Electric. It trades about 0.07 of its potential returns per unit of risk. Guangxi Guiguan Electric is currently generating about 0.0 per unit of risk. If you would invest  569.00  in Elite Color Environmental on October 23, 2024 and sell it today you would earn a total of  61.00  from holding Elite Color Environmental or generate 10.72% return on investment over 90 days.

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

Elite Color Environmental  vs.  Guangxi Guiguan Electric

Elite Color Environmental

Risk-Adjusted Performance

5 of 100

Modest

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 February 2025.

Guangxi Guiguan Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangxi Guiguan Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangxi Guiguan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elite Color and Guangxi Guiguan

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

The idea behind Elite Color Environmental and Guangxi Guiguan Electric 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.