Correlation Between Guangzhou Haozhi and Linzhou Heavy

Can any of the company-specific risk be diversified away by investing in both Guangzhou Haozhi and Linzhou Heavy 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 Haozhi and Linzhou Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Haozhi Industrial and Linzhou Heavy Machinery, you can compare the effects of market volatilities on Guangzhou Haozhi and Linzhou Heavy 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 Haozhi with a short position of Linzhou Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Haozhi and Linzhou Heavy.

Diversification Opportunities for Guangzhou Haozhi and Linzhou Heavy

0.8

Correlation Coefficient

Guangzhou Haozhi  Linzhou Heavy

Very poor diversification

The 3 months correlation between Guangzhou and Linzhou is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haozhi Industrial and Linzhou Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linzhou Heavy Machinery and Guangzhou Haozhi 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 Haozhi Industrial are associated (or correlated) with Linzhou Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linzhou Heavy Machinery has no effect on the direction of Guangzhou Haozhi i.e., Guangzhou Haozhi and Linzhou Heavy go up and down completely randomly.

Pair Corralation between Guangzhou Haozhi and Linzhou Heavy

Assuming the 90 days trading horizon Guangzhou Haozhi Industrial is expected to generate 1.71 times more return on investment than Linzhou Heavy. However, Guangzhou Haozhi is 1.71 times more volatile than Linzhou Heavy Machinery. It trades about 0.02 of its potential returns per unit of risk. Linzhou Heavy Machinery is currently generating about -0.07 per unit of risk. If you would invest  1,744  in Guangzhou Haozhi Industrial on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Guangzhou Haozhi Industrial or generate 0.29% return on investment over 90 days.

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

Guangzhou Haozhi Industrial  vs.  Linzhou Heavy Machinery

Guangzhou Haozhi Ind

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Linzhou Heavy Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linzhou Heavy Machinery 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.

Pair Trading with Guangzhou Haozhi and Linzhou Heavy

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

The idea behind Guangzhou Haozhi Industrial and Linzhou Heavy Machinery 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.