Correlation Between Guangdong Jinma and Vats Liquor

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

Diversification Opportunities for Guangdong Jinma and Vats Liquor

0.51

Correlation Coefficient

Guangdong Jinma  Vats Liquor

Very weak diversification

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

Pair Corralation between Guangdong Jinma and Vats Liquor

Assuming the 90 days trading horizon Guangdong Jinma is expected to generate 1.4 times less return on investment than Vats Liquor. But when comparing it to its historical volatility, Guangdong Jinma Entertainment is 1.14 times less risky than Vats Liquor. It trades about 0.02 of its potential returns per unit of risk. Vats Liquor Chain is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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

Guangdong Jinma Entertainment  vs.  Vats Liquor Chain

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.

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.

Pair Trading with Guangdong Jinma and Vats Liquor

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

The idea behind Guangdong Jinma Entertainment and Vats Liquor Chain 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.