Correlation Between Keyang Electric and GS Retail

Can any of the company-specific risk be diversified away by investing in both Keyang Electric and GS Retail 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 Keyang Electric and GS Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keyang Electric Machinery and GS Retail Co, you can compare the effects of market volatilities on Keyang Electric and GS Retail 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 Keyang Electric with a short position of GS Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyang Electric and GS Retail.

Diversification Opportunities for Keyang Electric and GS Retail

0.26

Correlation Coefficient

Keyang Electric  GS Retail

Modest diversification

The 3 months correlation between Keyang and 007070 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Keyang Electric Machinery and GS Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Retail and Keyang Electric 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 Keyang Electric Machinery are associated (or correlated) with GS Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Retail has no effect on the direction of Keyang Electric i.e., Keyang Electric and GS Retail go up and down completely randomly.

Pair Corralation between Keyang Electric and GS Retail

Assuming the 90 days trading horizon Keyang Electric Machinery is expected to under-perform the GS Retail. In addition to that, Keyang Electric is 1.06 times more volatile than GS Retail Co. It trades about -0.06 of its total potential returns per unit of risk. GS Retail Co is currently generating about 0.04 per unit of volatility. If you would invest  2,255,000  in GS Retail Co on September 5, 2024 and sell it today you would earn a total of  60,000  from holding GS Retail Co or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.83%
Values	Daily Returns

Keyang Electric Machinery  vs.  GS Retail Co

Keyang Electric Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyang Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GS Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GS Retail Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GS Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Keyang Electric and GS Retail

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

The idea behind Keyang Electric Machinery and GS Retail 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.