Correlation Between Guangdong Jinma and Changchun High

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

By analyzing existing cross correlation between Guangdong Jinma Entertainment and Changchun High New, you can compare the effects of market volatilities on Guangdong Jinma and Changchun High 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 Jinma with a short position of Changchun High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jinma and Changchun High.

Diversification Opportunities for Guangdong Jinma and Changchun High

0.26

Correlation Coefficient

Guangdong Jinma  Changchun High

Modest diversification

The 3 months correlation between Guangdong and Changchun is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinma Entertainment and Changchun High New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun High New and Guangdong Jinma 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 Jinma Entertainment are associated (or correlated) with Changchun High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun High New has no effect on the direction of Guangdong Jinma i.e., Guangdong Jinma and Changchun High go up and down completely randomly.

Pair Corralation between Guangdong Jinma and Changchun High

Assuming the 90 days trading horizon Guangdong Jinma Entertainment is expected to generate 1.46 times more return on investment than Changchun High. However, Guangdong Jinma is 1.46 times more volatile than Changchun High New. It trades about 0.1 of its potential returns per unit of risk. Changchun High New is currently generating about -0.02 per unit of risk. If you would invest  1,551  in Guangdong Jinma Entertainment on December 27, 2024 and sell it today you would earn a total of  182.00  from holding Guangdong Jinma Entertainment or generate 11.73% return on investment over 90 days.

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

Guangdong Jinma Entertainment  vs.  Changchun High New

Guangdong Jinma Ente

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinma Entertainment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinma sustained solid returns over the last few months and may actually be approaching a breakup point.

Changchun High New

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changchun High New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changchun High 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 Jinma and Changchun High

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

The idea behind Guangdong Jinma Entertainment and Changchun High New 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.