Correlation Between Vats Liquor and Guangdong Wens

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

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

Diversification Opportunities for Vats Liquor and Guangdong Wens

0.17

Correlation Coefficient

Vats Liquor  Guangdong Wens

Average diversification

The 3 months correlation between Vats and Guangdong is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Guangdong Wens Foodstuff in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Wens Foodstuff and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Guangdong Wens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Wens Foodstuff has no effect on the direction of Vats Liquor i.e., Vats Liquor and Guangdong Wens go up and down completely randomly.

Pair Corralation between Vats Liquor and Guangdong Wens

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Guangdong Wens. In addition to that, Vats Liquor is 3.61 times more volatile than Guangdong Wens Foodstuff. It trades about -0.13 of its total potential returns per unit of risk. Guangdong Wens Foodstuff is currently generating about -0.24 per unit of volatility. If you would invest  1,723  in Guangdong Wens Foodstuff on October 11, 2024 and sell it today you would lose (95.00) from holding Guangdong Wens Foodstuff or give up 5.51% of portfolio value over 90 days.

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

Vats Liquor Chain  vs.  Guangdong Wens Foodstuff

Vats Liquor Chain

Risk-Adjusted Performance

1 of 100

Weak

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

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 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 Vats Liquor and Guangdong Wens

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

The idea behind Vats Liquor Chain and Guangdong Wens Foodstuff 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 Global Correlations module to find global opportunities by holding instruments from different markets.