Correlation Between Guangzhou Boji and Xinjiang Baodi

Can any of the company-specific risk be diversified away by investing in both Guangzhou Boji and Xinjiang Baodi 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 Xinjiang Baodi 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 Xinjiang Baodi Mining, you can compare the effects of market volatilities on Guangzhou Boji and Xinjiang Baodi 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 Xinjiang Baodi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Boji and Xinjiang Baodi.

Diversification Opportunities for Guangzhou Boji and Xinjiang Baodi

0.59

Correlation Coefficient

Guangzhou Boji  Xinjiang Baodi

Very weak diversification

The 3 months correlation between Guangzhou and Xinjiang is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi 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 Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of Guangzhou Boji i.e., Guangzhou Boji and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between Guangzhou Boji and Xinjiang Baodi

Assuming the 90 days trading horizon Guangzhou Boji is expected to generate 1.12 times less return on investment than Xinjiang Baodi. In addition to that, Guangzhou Boji is 1.48 times more volatile than Xinjiang Baodi Mining. It trades about 0.06 of its total potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about 0.1 per unit of volatility. If you would invest  558.00  in Xinjiang Baodi Mining on October 4, 2024 and sell it today you would earn a total of  142.00  from holding Xinjiang Baodi Mining or generate 25.45% return on investment over 90 days.

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

Guangzhou Boji Medical  vs.  Xinjiang Baodi Mining

Guangzhou Boji Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Boji Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Xinjiang Baodi Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangzhou Boji and Xinjiang Baodi

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

The idea behind Guangzhou Boji Medical and Xinjiang Baodi 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.