Correlation Between China Sports and Guangzhou Boji

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

By analyzing existing cross correlation between China Sports Industry and Guangzhou Boji Medical, you can compare the effects of market volatilities on China Sports and Guangzhou Boji 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 China Sports with a short position of Guangzhou Boji. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Sports and Guangzhou Boji.

Diversification Opportunities for China Sports and Guangzhou Boji

0.69

Correlation Coefficient

China Sports  Guangzhou Boji

Poor diversification

The 3 months correlation between China and Guangzhou is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical and China Sports 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 China Sports Industry are associated (or correlated) with Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of China Sports i.e., China Sports and Guangzhou Boji go up and down completely randomly.

Pair Corralation between China Sports and Guangzhou Boji

Assuming the 90 days trading horizon China Sports Industry is expected to generate 0.93 times more return on investment than Guangzhou Boji. However, China Sports Industry is 1.07 times less risky than Guangzhou Boji. It trades about 0.02 of its potential returns per unit of risk. Guangzhou Boji Medical is currently generating about -0.03 per unit of risk. If you would invest  770.00  in China Sports Industry on October 23, 2024 and sell it today you would earn a total of  4.00  from holding China Sports Industry or generate 0.52% return on investment over 90 days.

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

China Sports Industry  vs.  Guangzhou Boji Medical

China Sports Industry

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Boji Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Sports and Guangzhou Boji

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

The idea behind China Sports Industry and Guangzhou Boji Medical 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.