Correlation Between Guangzhou Haozhi and Yili Chuanning

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

Diversification Opportunities for Guangzhou Haozhi and Yili Chuanning

0.74

Correlation Coefficient

Guangzhou Haozhi  Yili Chuanning

Poor diversification

The 3 months correlation between Guangzhou and Yili is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haozhi Industrial and Yili Chuanning Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yili Chuanning Biote 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 Yili Chuanning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yili Chuanning Biote has no effect on the direction of Guangzhou Haozhi i.e., Guangzhou Haozhi and Yili Chuanning go up and down completely randomly.

Pair Corralation between Guangzhou Haozhi and Yili Chuanning

Assuming the 90 days trading horizon Guangzhou Haozhi Industrial is expected to generate 1.9 times more return on investment than Yili Chuanning. However, Guangzhou Haozhi is 1.9 times more volatile than Yili Chuanning Biotechnology. It trades about 0.12 of its potential returns per unit of risk. Yili Chuanning Biotechnology is currently generating about 0.04 per unit of risk. If you would invest  2,073  in Guangzhou Haozhi Industrial on December 25, 2024 and sell it today you would earn a total of  572.00  from holding Guangzhou Haozhi Industrial or generate 27.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Guangzhou Haozhi Industrial  vs.  Yili Chuanning Biotechnology

Guangzhou Haozhi Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Yili Chuanning Biote

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yili Chuanning Biotechnology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yili Chuanning is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Haozhi and Yili Chuanning

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

The idea behind Guangzhou Haozhi Industrial and Yili Chuanning Biotechnology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.