Correlation Between Gifore Agricultural and Guangzhou Haige

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

By analyzing existing cross correlation between Gifore Agricultural Machinery and Guangzhou Haige Communications, you can compare the effects of market volatilities on Gifore Agricultural and Guangzhou Haige 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 Gifore Agricultural with a short position of Guangzhou Haige. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gifore Agricultural and Guangzhou Haige.

Diversification Opportunities for Gifore Agricultural and Guangzhou Haige

0.83

Correlation Coefficient

Gifore Agricultural  Guangzhou Haige

Very poor diversification

The 3 months correlation between Gifore and Guangzhou is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gifore Agricultural Machinery and Guangzhou Haige Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haige Comm and Gifore Agricultural 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 Gifore Agricultural Machinery are associated (or correlated) with Guangzhou Haige. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haige Comm has no effect on the direction of Gifore Agricultural i.e., Gifore Agricultural and Guangzhou Haige go up and down completely randomly.

Pair Corralation between Gifore Agricultural and Guangzhou Haige

Assuming the 90 days trading horizon Gifore Agricultural Machinery is expected to generate 1.22 times more return on investment than Guangzhou Haige. However, Gifore Agricultural is 1.22 times more volatile than Guangzhou Haige Communications. It trades about 0.17 of its potential returns per unit of risk. Guangzhou Haige Communications is currently generating about -0.07 per unit of risk. If you would invest  475.00  in Gifore Agricultural Machinery on September 22, 2024 and sell it today you would earn a total of  58.00  from holding Gifore Agricultural Machinery or generate 12.21% return on investment over 90 days.

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

Gifore Agricultural Machinery  vs.  Guangzhou Haige Communications

Gifore Agricultural

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gifore Agricultural Machinery are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gifore Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Haige Comm

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gifore Agricultural and Guangzhou Haige

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

The idea behind Gifore Agricultural Machinery and Guangzhou Haige Communications 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 Global Correlations module to find global opportunities by holding instruments from different markets.