Correlation Between Guanghui Energy and Gotion High

Can any of the company-specific risk be diversified away by investing in both Guanghui Energy and Gotion High 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 Guanghui Energy and Gotion High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guanghui Energy Co and Gotion High tech, you can compare the effects of market volatilities on Guanghui Energy and Gotion High 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 Guanghui Energy with a short position of Gotion High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guanghui Energy and Gotion High.

Diversification Opportunities for Guanghui Energy and Gotion High

0.78

Correlation Coefficient

Guanghui Energy  Gotion High

Poor diversification

The 3 months correlation between Guanghui and Gotion is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guanghui Energy Co and Gotion High tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotion High tech and Guanghui Energy 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 Guanghui Energy Co are associated (or correlated) with Gotion High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotion High tech has no effect on the direction of Guanghui Energy i.e., Guanghui Energy and Gotion High go up and down completely randomly.

Pair Corralation between Guanghui Energy and Gotion High

Assuming the 90 days trading horizon Guanghui Energy Co is expected to generate 0.92 times more return on investment than Gotion High. However, Guanghui Energy Co is 1.09 times less risky than Gotion High. It trades about 0.0 of its potential returns per unit of risk. Gotion High tech is currently generating about -0.02 per unit of risk. If you would invest  686.00  in Guanghui Energy Co on October 22, 2024 and sell it today you would lose (73.00) from holding Guanghui Energy Co or give up 10.64% of portfolio value over 90 days.

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

Guanghui Energy Co  vs.  Gotion High tech

Guanghui Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guanghui Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gotion High tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guanghui Energy and Gotion High

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

The idea behind Guanghui Energy Co and Gotion High tech 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.