Correlation Between Vats Liquor and Guangdong Jinma

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

Diversification Opportunities for Vats Liquor and Guangdong Jinma

0.51

Correlation Coefficient

Vats Liquor  Guangdong Jinma

Very weak diversification

The 3 months correlation between Vats and Guangdong is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Guangdong Jinma Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinma Ente 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 Jinma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinma Ente has no effect on the direction of Vats Liquor i.e., Vats Liquor and Guangdong Jinma go up and down completely randomly.

Pair Corralation between Vats Liquor and Guangdong Jinma

Assuming the 90 days trading horizon Vats Liquor Chain is expected to generate 1.14 times more return on investment than Guangdong Jinma. However, Vats Liquor is 1.14 times more volatile than Guangdong Jinma Entertainment. It trades about 0.03 of its potential returns per unit of risk. Guangdong Jinma Entertainment is currently generating about 0.02 per unit of risk. If you would invest  1,763  in Vats Liquor Chain on October 26, 2024 and sell it today you would earn a total of  38.00  from holding Vats Liquor Chain or generate 2.16% return on investment over 90 days.

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

Vats Liquor Chain  vs.  Guangdong Jinma Entertainment

Vats Liquor Chain

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vats Liquor Chain are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vats Liquor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guangdong Jinma Ente

Risk-Adjusted Performance

1 of 100

Insignificant

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

Pair Trading with Vats Liquor and Guangdong Jinma

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

The idea behind Vats Liquor Chain and Guangdong Jinma Entertainment 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.