Correlation Between Guangdong Jinming and Threes Company

Can any of the company-specific risk be diversified away by investing in both Guangdong Jinming and Threes Company 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 Threes Company 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 Threes Company Media, you can compare the effects of market volatilities on Guangdong Jinming and Threes Company 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 Threes Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jinming and Threes Company.

Diversification Opportunities for Guangdong Jinming and Threes Company

0.86

Correlation Coefficient

Guangdong Jinming  Threes Company

Very poor diversification

The 3 months correlation between Guangdong and Threes is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinming Machinery and Threes Company Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Threes Company 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 Threes Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Threes Company has no effect on the direction of Guangdong Jinming i.e., Guangdong Jinming and Threes Company go up and down completely randomly.

Pair Corralation between Guangdong Jinming and Threes Company

Assuming the 90 days trading horizon Guangdong Jinming is expected to generate 41.0 times less return on investment than Threes Company. But when comparing it to its historical volatility, Guangdong Jinming Machinery is 1.49 times less risky than Threes Company. It trades about 0.01 of its potential returns per unit of risk. Threes Company Media is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,175  in Threes Company Media on September 21, 2024 and sell it today you would earn a total of  761.00  from holding Threes Company Media or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Guangdong Jinming Machinery  vs.  Threes Company Media

Guangdong Jinming

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinming Machinery are ranked lower than 12 (%) 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.

Threes Company

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Guangdong Jinming and Threes Company

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

The idea behind Guangdong Jinming Machinery and Threes Company Media 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.