Correlation Between Guangzhou Boji and Xiangyu Medical

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

Diversification Opportunities for Guangzhou Boji and Xiangyu Medical

0.66

Correlation Coefficient

Guangzhou Boji  Xiangyu Medical

Poor diversification

The 3 months correlation between Guangzhou and Xiangyu is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and Xiangyu Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyu Medical 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 Xiangyu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyu Medical has no effect on the direction of Guangzhou Boji i.e., Guangzhou Boji and Xiangyu Medical go up and down completely randomly.

Pair Corralation between Guangzhou Boji and Xiangyu Medical

Assuming the 90 days trading horizon Guangzhou Boji Medical is expected to under-perform the Xiangyu Medical. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Boji Medical is 1.11 times less risky than Xiangyu Medical. The stock trades about -0.31 of its potential returns per unit of risk. The Xiangyu Medical Co is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  3,398  in Xiangyu Medical Co on October 20, 2024 and sell it today you would lose (447.00) from holding Xiangyu Medical Co or give up 13.15% of portfolio value over 90 days.

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

Guangzhou Boji Medical  vs.  Xiangyu Medical Co

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 somewhat strong basic indicators, Guangzhou Boji is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiangyu Medical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Guangzhou Boji and Xiangyu Medical

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

The idea behind Guangzhou Boji Medical and Xiangyu Medical Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.