Correlation Between Guangdong Jinma and Zhejiang Qianjiang

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

Diversification Opportunities for Guangdong Jinma and Zhejiang Qianjiang

-0.25

Correlation Coefficient

Guangdong Jinma  Zhejiang Qianjiang

Very good diversification

The 3 months correlation between Guangdong and Zhejiang is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinma Entertainment and Zhejiang Qianjiang Motorcycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Qianjiang 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 Zhejiang Qianjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Qianjiang has no effect on the direction of Guangdong Jinma i.e., Guangdong Jinma and Zhejiang Qianjiang go up and down completely randomly.

Pair Corralation between Guangdong Jinma and Zhejiang Qianjiang

Assuming the 90 days trading horizon Guangdong Jinma is expected to generate 18.64 times less return on investment than Zhejiang Qianjiang. In addition to that, Guangdong Jinma is 1.15 times more volatile than Zhejiang Qianjiang Motorcycle. It trades about 0.0 of its total potential returns per unit of risk. Zhejiang Qianjiang Motorcycle is currently generating about 0.08 per unit of volatility. If you would invest  1,126  in Zhejiang Qianjiang Motorcycle on October 6, 2024 and sell it today you would earn a total of  698.00  from holding Zhejiang Qianjiang Motorcycle or generate 61.99% return on investment over 90 days.

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

Guangdong Jinma Entertainment  vs.  Zhejiang Qianjiang Motorcycle

Guangdong Jinma Ente

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Jinma Entertainment 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.

Zhejiang Qianjiang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Qianjiang Motorcycle 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 Guangdong Jinma and Zhejiang Qianjiang

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

The idea behind Guangdong Jinma Entertainment and Zhejiang Qianjiang Motorcycle 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.