Correlation Between Guangdong Wens and China Railway

Can any of the company-specific risk be diversified away by investing in both Guangdong Wens and China Railway 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 Railway 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 Railway Construction, you can compare the effects of market volatilities on Guangdong Wens and China Railway 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 Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Wens and China Railway.

Diversification Opportunities for Guangdong Wens and China Railway

-0.06

Correlation Coefficient

Guangdong Wens  China Railway

Good diversification

The 3 months correlation between Guangdong and China is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr 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 Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and China Railway go up and down completely randomly.

Pair Corralation between Guangdong Wens and China Railway

If you would invest  0.00  in China Railway Construction on October 10, 2024 and sell it today you would earn a total of  0.00  from holding China Railway Construction or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Guangdong Wens Foodstuff  vs.  China Railway Construction

Guangdong Wens Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Wens Foodstuff has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Railway Constr

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guangdong Wens and China Railway

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

The idea behind Guangdong Wens Foodstuff and China Railway Construction 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.