Correlation Between Sublime China and Hangzhou Gisway

Can any of the company-specific risk be diversified away by investing in both Sublime China and Hangzhou Gisway 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 Sublime China and Hangzhou Gisway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sublime China Information and Hangzhou Gisway Information, you can compare the effects of market volatilities on Sublime China and Hangzhou Gisway 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 Sublime China with a short position of Hangzhou Gisway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sublime China and Hangzhou Gisway.

Diversification Opportunities for Sublime China and Hangzhou Gisway

0.01

Correlation Coefficient

Sublime China  Hangzhou Gisway

Significant diversification

The 3 months correlation between Sublime and Hangzhou is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sublime China Information and Hangzhou Gisway Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Gisway Info and Sublime China 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 Sublime China Information are associated (or correlated) with Hangzhou Gisway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Gisway Info has no effect on the direction of Sublime China i.e., Sublime China and Hangzhou Gisway go up and down completely randomly.

Pair Corralation between Sublime China and Hangzhou Gisway

Assuming the 90 days trading horizon Sublime China Information is expected to generate 1.45 times more return on investment than Hangzhou Gisway. However, Sublime China is 1.45 times more volatile than Hangzhou Gisway Information. It trades about 0.24 of its potential returns per unit of risk. Hangzhou Gisway Information is currently generating about -0.14 per unit of risk. If you would invest  5,354  in Sublime China Information on October 26, 2024 and sell it today you would earn a total of  1,319  from holding Sublime China Information or generate 24.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sublime China Information  vs.  Hangzhou Gisway Information

Sublime China Information

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sublime China Information are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sublime China sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou Gisway Info

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sublime China and Hangzhou Gisway

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

The idea behind Sublime China Information and Hangzhou Gisway Information 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 Global Correlations module to find global opportunities by holding instruments from different markets.