Correlation Between Guangzhou Ruoyuchen and Hygon Information

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

Diversification Opportunities for Guangzhou Ruoyuchen and Hygon Information

0.72

Correlation Coefficient

Guangzhou Ruoyuchen  Hygon Information

Poor diversification

The 3 months correlation between Guangzhou and Hygon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Ruoyuchen Informatio and Hygon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hygon Information 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 Hygon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hygon Information has no effect on the direction of Guangzhou Ruoyuchen i.e., Guangzhou Ruoyuchen and Hygon Information go up and down completely randomly.

Pair Corralation between Guangzhou Ruoyuchen and Hygon Information

Assuming the 90 days trading horizon Guangzhou Ruoyuchen Information is expected to generate 1.11 times more return on investment than Hygon Information. However, Guangzhou Ruoyuchen is 1.11 times more volatile than Hygon Information Technology. It trades about 0.22 of its potential returns per unit of risk. Hygon Information Technology is currently generating about 0.13 per unit of risk. If you would invest  2,330  in Guangzhou Ruoyuchen Information on December 11, 2024 and sell it today you would earn a total of  1,591  from holding Guangzhou Ruoyuchen Information or generate 68.28% return on investment over 90 days.

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

Guangzhou Ruoyuchen Informatio  vs.  Hygon Information Technology

Guangzhou Ruoyuchen

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 17 (%) 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.

Hygon Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hygon Information Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hygon Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Ruoyuchen and Hygon Information

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

The idea behind Guangzhou Ruoyuchen Information and Hygon Information Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.