Correlation Between Guangzhou Boji and Qingdao Haier

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

Diversification Opportunities for Guangzhou Boji and Qingdao Haier

0.47

Correlation Coefficient

Guangzhou Boji  Qingdao Haier

Very weak diversification

The 3 months correlation between Guangzhou and Qingdao is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and Qingdao Haier Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier Biomedical 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 Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier Biomedical has no effect on the direction of Guangzhou Boji i.e., Guangzhou Boji and Qingdao Haier go up and down completely randomly.

Pair Corralation between Guangzhou Boji and Qingdao Haier

Assuming the 90 days trading horizon Guangzhou Boji Medical is expected to generate 1.33 times more return on investment than Qingdao Haier. However, Guangzhou Boji is 1.33 times more volatile than Qingdao Haier Biomedical. It trades about 0.06 of its potential returns per unit of risk. Qingdao Haier Biomedical is currently generating about -0.01 per unit of risk. If you would invest  908.00  in Guangzhou Boji Medical on December 27, 2024 and sell it today you would earn a total of  73.00  from holding Guangzhou Boji Medical or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Guangzhou Boji Medical  vs.  Qingdao Haier Biomedical

Guangzhou Boji Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Boji Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Boji may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Qingdao Haier Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qingdao Haier Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Qingdao Haier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Boji and Qingdao Haier

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

The idea behind Guangzhou Boji Medical and Qingdao Haier Biomedical 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.