Correlation Between Guangzhou Boji and Jiangxi Naipu

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

By analyzing existing cross correlation between Guangzhou Boji Medical and Jiangxi Naipu Mining, you can compare the effects of market volatilities on Guangzhou Boji and Jiangxi Naipu 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 Guangzhou Boji with a short position of Jiangxi Naipu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Boji and Jiangxi Naipu.

Diversification Opportunities for Guangzhou Boji and Jiangxi Naipu

0.93

Correlation Coefficient

Guangzhou Boji  Jiangxi Naipu

Almost no diversification

The 3 months correlation between Guangzhou and Jiangxi is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining and Guangzhou Boji 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 Guangzhou Boji Medical are associated (or correlated) with Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of Guangzhou Boji i.e., Guangzhou Boji and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between Guangzhou Boji and Jiangxi Naipu

Assuming the 90 days trading horizon Guangzhou Boji Medical is expected to generate 1.13 times more return on investment than Jiangxi Naipu. However, Guangzhou Boji is 1.13 times more volatile than Jiangxi Naipu Mining. It trades about 0.15 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.16 per unit of risk. If you would invest  715.00  in Guangzhou Boji Medical on September 22, 2024 and sell it today you would earn a total of  254.00  from holding Guangzhou Boji Medical or generate 35.52% return on investment over 90 days.

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

Guangzhou Boji Medical  vs.  Jiangxi Naipu Mining

Guangzhou Boji Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Boji Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Boji sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Naipu Mining

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Guangzhou Boji and Jiangxi Naipu

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

The idea behind Guangzhou Boji Medical and Jiangxi Naipu Mining 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.