Correlation Between Guangzhou Ruoyuchen and Wuxi Chemical

Can any of the company-specific risk be diversified away by investing in both Guangzhou Ruoyuchen and Wuxi Chemical 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 Guangzhou Ruoyuchen and Wuxi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Ruoyuchen Information and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Guangzhou Ruoyuchen and Wuxi Chemical 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 Guangzhou Ruoyuchen with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Ruoyuchen and Wuxi Chemical.

Diversification Opportunities for Guangzhou Ruoyuchen and Wuxi Chemical

0.58

Correlation Coefficient

Guangzhou Ruoyuchen  Wuxi Chemical

Very weak diversification

The 3 months correlation between Guangzhou and Wuxi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Ruoyuchen Informatio and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Guangzhou Ruoyuchen 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 Guangzhou Ruoyuchen Information are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Guangzhou Ruoyuchen i.e., Guangzhou Ruoyuchen and Wuxi Chemical go up and down completely randomly.

Pair Corralation between Guangzhou Ruoyuchen and Wuxi Chemical

Assuming the 90 days trading horizon Guangzhou Ruoyuchen Information is expected to generate 3.15 times more return on investment than Wuxi Chemical. However, Guangzhou Ruoyuchen is 3.15 times more volatile than Wuxi Chemical Equipment. It trades about 0.15 of its potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about 0.08 per unit of risk. If you would invest  2,889  in Guangzhou Ruoyuchen Information on December 25, 2024 and sell it today you would earn a total of  1,149  from holding Guangzhou Ruoyuchen Information or generate 39.77% return on investment over 90 days.

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

Guangzhou Ruoyuchen Informatio  vs.  Wuxi Chemical Equipment

Guangzhou Ruoyuchen

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Ruoyuchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Wuxi Chemical Equipment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Guangzhou Ruoyuchen and Wuxi Chemical

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

The idea behind Guangzhou Ruoyuchen Information and Wuxi Chemical Equipment 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.