Correlation Between State Grid and Guangzhou Seagull

Can any of the company-specific risk be diversified away by investing in both State Grid and Guangzhou Seagull 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 State Grid and Guangzhou Seagull into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Grid InformationCommunication and Guangzhou Seagull Kitchen, you can compare the effects of market volatilities on State Grid and Guangzhou Seagull 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 State Grid with a short position of Guangzhou Seagull. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Guangzhou Seagull.

Diversification Opportunities for State Grid and Guangzhou Seagull

0.6

Correlation Coefficient

State Grid  Guangzhou Seagull

Poor diversification

The 3 months correlation between State and Guangzhou is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Guangzhou Seagull Kitchen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Seagull Kitchen and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Guangzhou Seagull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Seagull Kitchen has no effect on the direction of State Grid i.e., State Grid and Guangzhou Seagull go up and down completely randomly.

Pair Corralation between State Grid and Guangzhou Seagull

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Guangzhou Seagull. In addition to that, State Grid is 1.07 times more volatile than Guangzhou Seagull Kitchen. It trades about -0.01 of its total potential returns per unit of risk. Guangzhou Seagull Kitchen is currently generating about 0.0 per unit of volatility. If you would invest  293.00  in Guangzhou Seagull Kitchen on December 30, 2024 and sell it today you would lose (3.00) from holding Guangzhou Seagull Kitchen or give up 1.02% of portfolio value over 90 days.

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

State Grid InformationCommunic  vs.  Guangzhou Seagull Kitchen

State Grid Informati

Risk-Adjusted Performance

Very Weak

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

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

Very Weak

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

Pair Trading with State Grid and Guangzhou Seagull

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

The idea behind State Grid InformationCommunication and Guangzhou Seagull Kitchen 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.