Correlation Between Puyang Huicheng and Kunshan Guoli

Can any of the company-specific risk be diversified away by investing in both Puyang Huicheng and Kunshan Guoli 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 Puyang Huicheng and Kunshan Guoli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Puyang Huicheng Electronic and Kunshan Guoli Electronic, you can compare the effects of market volatilities on Puyang Huicheng and Kunshan Guoli 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 Puyang Huicheng with a short position of Kunshan Guoli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Puyang Huicheng and Kunshan Guoli.

Diversification Opportunities for Puyang Huicheng and Kunshan Guoli

0.31

Correlation Coefficient

Puyang Huicheng  Kunshan Guoli

Weak diversification

The 3 months correlation between Puyang and Kunshan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Puyang Huicheng Electronic and Kunshan Guoli Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunshan Guoli Electronic and Puyang Huicheng 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 Puyang Huicheng Electronic are associated (or correlated) with Kunshan Guoli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunshan Guoli Electronic has no effect on the direction of Puyang Huicheng i.e., Puyang Huicheng and Kunshan Guoli go up and down completely randomly.

Pair Corralation between Puyang Huicheng and Kunshan Guoli

Assuming the 90 days trading horizon Puyang Huicheng Electronic is expected to under-perform the Kunshan Guoli. But the stock apears to be less risky and, when comparing its historical volatility, Puyang Huicheng Electronic is 1.34 times less risky than Kunshan Guoli. The stock trades about -0.09 of its potential returns per unit of risk. The Kunshan Guoli Electronic is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,266  in Kunshan Guoli Electronic on December 1, 2024 and sell it today you would earn a total of  628.00  from holding Kunshan Guoli Electronic or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Puyang Huicheng Electronic  vs.  Kunshan Guoli Electronic

Puyang Huicheng Elec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Puyang Huicheng Electronic 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.

Kunshan Guoli Electronic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kunshan Guoli Electronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kunshan Guoli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puyang Huicheng and Kunshan Guoli

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

The idea behind Puyang Huicheng Electronic and Kunshan Guoli Electronic 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.