Correlation Between Guangdong Jinming and Industrial

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

By analyzing existing cross correlation between Guangdong Jinming Machinery and Industrial and Commercial, you can compare the effects of market volatilities on Guangdong Jinming and Industrial 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 Jinming with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jinming and Industrial.

Diversification Opportunities for Guangdong Jinming and Industrial

0.74

Correlation Coefficient

Guangdong Jinming  Industrial

Poor diversification

The 3 months correlation between Guangdong and Industrial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinming Machinery and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Guangdong Jinming 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 Jinming Machinery are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Guangdong Jinming i.e., Guangdong Jinming and Industrial go up and down completely randomly.

Pair Corralation between Guangdong Jinming and Industrial

Assuming the 90 days trading horizon Guangdong Jinming Machinery is expected to generate 3.19 times more return on investment than Industrial. However, Guangdong Jinming is 3.19 times more volatile than Industrial and Commercial. It trades about 0.19 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.15 per unit of risk. If you would invest  437.00  in Guangdong Jinming Machinery on September 13, 2024 and sell it today you would earn a total of  263.00  from holding Guangdong Jinming Machinery or generate 60.18% return on investment over 90 days.

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

Guangdong Jinming Machinery  vs.  Industrial and Commercial

Guangdong Jinming

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinming Machinery are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinming sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Jinming and Industrial

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

The idea behind Guangdong Jinming Machinery and Industrial and Commercial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.