Correlation Between Huaxia Fund and Guangxi Wuzhou

Can any of the company-specific risk be diversified away by investing in both Huaxia Fund and Guangxi Wuzhou 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 Huaxia Fund and Guangxi Wuzhou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huaxia Fund Management and Guangxi Wuzhou Communications, you can compare the effects of market volatilities on Huaxia Fund and Guangxi Wuzhou 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 Huaxia Fund with a short position of Guangxi Wuzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxia Fund and Guangxi Wuzhou.

Diversification Opportunities for Huaxia Fund and Guangxi Wuzhou

0.72

Correlation Coefficient

Huaxia Fund  Guangxi Wuzhou

Poor diversification

The 3 months correlation between Huaxia and Guangxi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and Guangxi Wuzhou Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangxi Wuzhou Commu and Huaxia Fund 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 Huaxia Fund Management are associated (or correlated) with Guangxi Wuzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangxi Wuzhou Commu has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and Guangxi Wuzhou go up and down completely randomly.

Pair Corralation between Huaxia Fund and Guangxi Wuzhou

Assuming the 90 days trading horizon Huaxia Fund is expected to generate 1.97 times less return on investment than Guangxi Wuzhou. But when comparing it to its historical volatility, Huaxia Fund Management is 2.29 times less risky than Guangxi Wuzhou. It trades about 0.05 of its potential returns per unit of risk. Guangxi Wuzhou Communications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Guangxi Wuzhou Communications on October 10, 2024 and sell it today you would earn a total of  122.00  from holding Guangxi Wuzhou Communications or generate 36.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Huaxia Fund Management  vs.  Guangxi Wuzhou Communications

Huaxia Fund Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangxi Wuzhou Commu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangxi Wuzhou Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangxi Wuzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaxia Fund and Guangxi Wuzhou

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

The idea behind Huaxia Fund Management and Guangxi Wuzhou Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.