Correlation Between East Money and Guangdong Jingyi

Can any of the company-specific risk be diversified away by investing in both East Money and Guangdong Jingyi 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 East Money and Guangdong Jingyi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Money Information and Guangdong Jingyi Metal, you can compare the effects of market volatilities on East Money and Guangdong Jingyi 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 East Money with a short position of Guangdong Jingyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Money and Guangdong Jingyi.

Diversification Opportunities for East Money and Guangdong Jingyi

0.83

Correlation Coefficient

East Money  Guangdong Jingyi

Very poor diversification

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

Pair Corralation between East Money and Guangdong Jingyi

Assuming the 90 days trading horizon East Money Information is expected to under-perform the Guangdong Jingyi. But the stock apears to be less risky and, when comparing its historical volatility, East Money Information is 1.22 times less risky than Guangdong Jingyi. The stock trades about -0.38 of its potential returns per unit of risk. The Guangdong Jingyi Metal is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  764.00  in Guangdong Jingyi Metal on October 11, 2024 and sell it today you would lose (121.00) from holding Guangdong Jingyi Metal or give up 15.84% of portfolio value over 90 days.

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

East Money Information  vs.  Guangdong Jingyi Metal

East Money Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in East Money Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East Money sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jingyi Metal

Risk-Adjusted Performance

8 of 100

Modest

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

Pair Trading with East Money and Guangdong Jingyi

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

The idea behind East Money Information and Guangdong Jingyi Metal 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.