Correlation Between State Grid and Guangdong Zhongsheng

Can any of the company-specific risk be diversified away by investing in both State Grid and Guangdong Zhongsheng 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 Guangdong Zhongsheng 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 Guangdong Zhongsheng Pharmaceutical, you can compare the effects of market volatilities on State Grid and Guangdong Zhongsheng 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 Guangdong Zhongsheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Guangdong Zhongsheng.

Diversification Opportunities for State Grid and Guangdong Zhongsheng

-0.44

Correlation Coefficient

State Grid  Guangdong Zhongsheng

Very good diversification

The 3 months correlation between State and Guangdong is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Guangdong Zhongsheng Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Zhongsheng 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 Guangdong Zhongsheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Zhongsheng has no effect on the direction of State Grid i.e., State Grid and Guangdong Zhongsheng go up and down completely randomly.

Pair Corralation between State Grid and Guangdong Zhongsheng

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to generate 1.19 times more return on investment than Guangdong Zhongsheng. However, State Grid is 1.19 times more volatile than Guangdong Zhongsheng Pharmaceutical. It trades about -0.01 of its potential returns per unit of risk. Guangdong Zhongsheng Pharmaceutical is currently generating about -0.05 per unit of risk. If you would invest  1,975  in State Grid InformationCommunication on December 26, 2024 and sell it today you would lose (52.00) from holding State Grid InformationCommunication or give up 2.63% of portfolio value over 90 days.

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

State Grid InformationCommunic  vs.  Guangdong Zhongsheng Pharmaceu

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.

Guangdong Zhongsheng

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Zhongsheng Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with State Grid and Guangdong Zhongsheng

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

The idea behind State Grid InformationCommunication and Guangdong Zhongsheng Pharmaceutical 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.