Correlation Between Grand Ocean and China Development

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

By analyzing existing cross correlation between Grand Ocean Retail and China Development Financial, you can compare the effects of market volatilities on Grand Ocean and China Development 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 Grand Ocean with a short position of China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Ocean and China Development.

Diversification Opportunities for Grand Ocean and China Development

-0.06

Correlation Coefficient

Grand Ocean  China Development

Good diversification

The 3 months correlation between Grand and China is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Grand Ocean Retail and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and Grand Ocean 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 Grand Ocean Retail are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Grand Ocean i.e., Grand Ocean and China Development go up and down completely randomly.

Pair Corralation between Grand Ocean and China Development

Assuming the 90 days trading horizon Grand Ocean Retail is expected to under-perform the China Development. In addition to that, Grand Ocean is 1.79 times more volatile than China Development Financial. It trades about -0.15 of its total potential returns per unit of risk. China Development Financial is currently generating about 0.05 per unit of volatility. If you would invest  1,730  in China Development Financial on December 29, 2024 and sell it today you would earn a total of  45.00  from holding China Development Financial or generate 2.6% return on investment over 90 days.

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

Grand Ocean Retail  vs.  China Development Financial

Grand Ocean Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grand Ocean Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

China Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Development Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Grand Ocean and China Development

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

The idea behind Grand Ocean Retail and China Development Financial 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.