Correlation Between Eit Environmental and Guangdong Transtek

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

By analyzing existing cross correlation between Eit Environmental Development and Guangdong Transtek Medical, you can compare the effects of market volatilities on Eit Environmental and Guangdong Transtek 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 Eit Environmental with a short position of Guangdong Transtek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eit Environmental and Guangdong Transtek.

Diversification Opportunities for Eit Environmental and Guangdong Transtek

0.52

Correlation Coefficient

Eit Environmental  Guangdong Transtek

Very weak diversification

The 3 months correlation between Eit and Guangdong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eit Environmental Development and Guangdong Transtek Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Transtek and Eit Environmental 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 Eit Environmental Development are associated (or correlated) with Guangdong Transtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Transtek has no effect on the direction of Eit Environmental i.e., Eit Environmental and Guangdong Transtek go up and down completely randomly.

Pair Corralation between Eit Environmental and Guangdong Transtek

Assuming the 90 days trading horizon Eit Environmental Development is expected to generate 0.65 times more return on investment than Guangdong Transtek. However, Eit Environmental Development is 1.55 times less risky than Guangdong Transtek. It trades about 0.04 of its potential returns per unit of risk. Guangdong Transtek Medical is currently generating about 0.0 per unit of risk. If you would invest  1,439  in Eit Environmental Development on October 25, 2024 and sell it today you would earn a total of  62.00  from holding Eit Environmental Development or generate 4.31% return on investment over 90 days.

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

Eit Environmental Development  vs.  Guangdong Transtek Medical

Eit Environmental

Risk-Adjusted Performance

2 of 100

Weak

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

Guangdong Transtek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Transtek Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Transtek is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eit Environmental and Guangdong Transtek

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

The idea behind Eit Environmental Development and Guangdong Transtek Medical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.