Correlation Between Guanghui Energy and Shanghai

Can any of the company-specific risk be diversified away by investing in both Guanghui Energy and Shanghai 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 Shanghai 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 Shanghai SK Automation, you can compare the effects of market volatilities on Guanghui Energy and Shanghai 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 Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guanghui Energy and Shanghai.

Diversification Opportunities for Guanghui Energy and Shanghai

0.29

Correlation Coefficient

Guanghui Energy  Shanghai

Modest diversification

The 3 months correlation between Guanghui and Shanghai is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Guanghui Energy Co and Shanghai SK Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai SK Automation 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 Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai SK Automation has no effect on the direction of Guanghui Energy i.e., Guanghui Energy and Shanghai go up and down completely randomly.

Pair Corralation between Guanghui Energy and Shanghai

Assuming the 90 days trading horizon Guanghui Energy Co is expected to generate 0.53 times more return on investment than Shanghai. However, Guanghui Energy Co is 1.88 times less risky than Shanghai. It trades about -0.13 of its potential returns per unit of risk. Shanghai SK Automation is currently generating about -0.11 per unit of risk. If you would invest  768.00  in Guanghui Energy Co on October 6, 2024 and sell it today you would lose (119.00) from holding Guanghui Energy Co or give up 15.49% of portfolio value over 90 days.

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

Guanghui Energy Co  vs.  Shanghai SK Automation

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.

Shanghai SK Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai SK Automation 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.

Pair Trading with Guanghui Energy and Shanghai

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

The idea behind Guanghui Energy Co and Shanghai SK Automation 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.