Correlation Between Great Wall and President Chain

Can any of the company-specific risk be diversified away by investing in both Great Wall and President Chain 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 Great Wall and President Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Wall Enterprise and President Chain Store, you can compare the effects of market volatilities on Great Wall and President Chain 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 Great Wall with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and President Chain.

Diversification Opportunities for Great Wall and President Chain

-0.56

Correlation Coefficient

Great Wall  President Chain

Excellent diversification

The 3 months correlation between Great and President is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Great Wall 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 Great Wall Enterprise are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Great Wall i.e., Great Wall and President Chain go up and down completely randomly.

Pair Corralation between Great Wall and President Chain

Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.59 times more return on investment than President Chain. However, Great Wall Enterprise is 1.68 times less risky than President Chain. It trades about 0.12 of its potential returns per unit of risk. President Chain Store is currently generating about -0.1 per unit of risk. If you would invest  5,090  in Great Wall Enterprise on September 13, 2024 and sell it today you would earn a total of  260.00  from holding Great Wall Enterprise or generate 5.11% return on investment over 90 days.

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

Great Wall Enterprise  vs.  President Chain Store

Great Wall Enterprise

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Enterprise are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great Wall is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Great Wall and President Chain

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

The idea behind Great Wall Enterprise and President Chain Store 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.