Correlation Between Guangdong Wens and China Molybdenum

Can any of the company-specific risk be diversified away by investing in both Guangdong Wens and China Molybdenum 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 Guangdong Wens and China Molybdenum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Wens Foodstuff and China Molybdenum Co, you can compare the effects of market volatilities on Guangdong Wens and China Molybdenum 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 Guangdong Wens with a short position of China Molybdenum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Wens and China Molybdenum.

Diversification Opportunities for Guangdong Wens and China Molybdenum

0.65

Correlation Coefficient

Guangdong Wens  China Molybdenum

Poor diversification

The 3 months correlation between Guangdong and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and China Molybdenum Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Molybdenum and Guangdong Wens 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 Guangdong Wens Foodstuff are associated (or correlated) with China Molybdenum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Molybdenum has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and China Molybdenum go up and down completely randomly.

Pair Corralation between Guangdong Wens and China Molybdenum

Assuming the 90 days trading horizon Guangdong Wens is expected to generate 14.3 times less return on investment than China Molybdenum. But when comparing it to its historical volatility, Guangdong Wens Foodstuff is 1.81 times less risky than China Molybdenum. It trades about 0.02 of its potential returns per unit of risk. China Molybdenum Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  682.00  in China Molybdenum Co on December 27, 2024 and sell it today you would earn a total of  116.00  from holding China Molybdenum Co or generate 17.01% return on investment over 90 days.

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

Guangdong Wens Foodstuff  vs.  China Molybdenum Co

Guangdong Wens Foodstuff

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Wens Foodstuff are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Wens is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Molybdenum

Risk-Adjusted Performance

OK

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

Pair Trading with Guangdong Wens and China Molybdenum

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

The idea behind Guangdong Wens Foodstuff and China Molybdenum 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.