Correlation Between Guangzhou Ruoyuchen and Shenzhen Aisidi

Can any of the company-specific risk be diversified away by investing in both Guangzhou Ruoyuchen and Shenzhen Aisidi 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 Shenzhen Aisidi 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 Shenzhen Aisidi Co, you can compare the effects of market volatilities on Guangzhou Ruoyuchen and Shenzhen Aisidi 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 Shenzhen Aisidi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Ruoyuchen and Shenzhen Aisidi.

Diversification Opportunities for Guangzhou Ruoyuchen and Shenzhen Aisidi

0.38

Correlation Coefficient

Guangzhou Ruoyuchen  Shenzhen Aisidi

Weak diversification

The 3 months correlation between Guangzhou and Shenzhen is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Ruoyuchen Informatio and Shenzhen Aisidi Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Aisidi 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 Shenzhen Aisidi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Aisidi has no effect on the direction of Guangzhou Ruoyuchen i.e., Guangzhou Ruoyuchen and Shenzhen Aisidi go up and down completely randomly.

Pair Corralation between Guangzhou Ruoyuchen and Shenzhen Aisidi

Assuming the 90 days trading horizon Guangzhou Ruoyuchen Information is expected to generate 1.08 times more return on investment than Shenzhen Aisidi. However, Guangzhou Ruoyuchen is 1.08 times more volatile than Shenzhen Aisidi Co. It trades about 0.2 of its potential returns per unit of risk. Shenzhen Aisidi Co is currently generating about -0.04 per unit of risk. If you would invest  2,213  in Guangzhou Ruoyuchen Information on October 10, 2024 and sell it today you would earn a total of  490.00  from holding Guangzhou Ruoyuchen Information or generate 22.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Guangzhou Ruoyuchen Informatio  vs.  Shenzhen Aisidi Co

Guangzhou Ruoyuchen

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 18 (%) 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.

Shenzhen Aisidi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Aisidi Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Aisidi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Ruoyuchen and Shenzhen Aisidi

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

The idea behind Guangzhou Ruoyuchen Information and Shenzhen Aisidi Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.