Correlation Between Guangdong Silvere and Xiangpiaopiao Food

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

By analyzing existing cross correlation between Guangdong Silvere Sci and Xiangpiaopiao Food Co, you can compare the effects of market volatilities on Guangdong Silvere and Xiangpiaopiao Food 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 Guangdong Silvere with a short position of Xiangpiaopiao Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Silvere and Xiangpiaopiao Food.

Diversification Opportunities for Guangdong Silvere and Xiangpiaopiao Food

0.85

Correlation Coefficient

Guangdong Silvere  Xiangpiaopiao Food

Very poor diversification

The 3 months correlation between Guangdong and Xiangpiaopiao is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Silvere Sci and Xiangpiaopiao Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangpiaopiao Food and Guangdong Silvere 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 Guangdong Silvere Sci are associated (or correlated) with Xiangpiaopiao Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangpiaopiao Food has no effect on the direction of Guangdong Silvere i.e., Guangdong Silvere and Xiangpiaopiao Food go up and down completely randomly.

Pair Corralation between Guangdong Silvere and Xiangpiaopiao Food

Assuming the 90 days trading horizon Guangdong Silvere is expected to generate 2.13 times less return on investment than Xiangpiaopiao Food. But when comparing it to its historical volatility, Guangdong Silvere Sci is 1.08 times less risky than Xiangpiaopiao Food. It trades about 0.09 of its potential returns per unit of risk. Xiangpiaopiao Food Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,052  in Xiangpiaopiao Food Co on September 23, 2024 and sell it today you would earn a total of  586.00  from holding Xiangpiaopiao Food Co or generate 55.7% return on investment over 90 days.

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

Guangdong Silvere Sci  vs.  Xiangpiaopiao Food Co

Guangdong Silvere Sci

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Silvere Sci are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Silvere sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiangpiaopiao Food

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangpiaopiao Food Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangpiaopiao Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Silvere and Xiangpiaopiao Food

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

The idea behind Guangdong Silvere Sci and Xiangpiaopiao Food 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.