Correlation Between Guodian Nanjing and Jiugui Liquor

Can any of the company-specific risk be diversified away by investing in both Guodian Nanjing and Jiugui Liquor 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 Guodian Nanjing and Jiugui Liquor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guodian Nanjing Automation and Jiugui Liquor Co, you can compare the effects of market volatilities on Guodian Nanjing and Jiugui Liquor 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 Guodian Nanjing with a short position of Jiugui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guodian Nanjing and Jiugui Liquor.

Diversification Opportunities for Guodian Nanjing and Jiugui Liquor

0.42

Correlation Coefficient

Guodian Nanjing  Jiugui Liquor

Very weak diversification

The 3 months correlation between Guodian and Jiugui is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guodian Nanjing Automation and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor and Guodian Nanjing 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 Guodian Nanjing Automation are associated (or correlated) with Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of Guodian Nanjing i.e., Guodian Nanjing and Jiugui Liquor go up and down completely randomly.

Pair Corralation between Guodian Nanjing and Jiugui Liquor

Assuming the 90 days trading horizon Guodian Nanjing Automation is expected to generate 0.73 times more return on investment than Jiugui Liquor. However, Guodian Nanjing Automation is 1.37 times less risky than Jiugui Liquor. It trades about -0.12 of its potential returns per unit of risk. Jiugui Liquor Co is currently generating about -0.36 per unit of risk. If you would invest  691.00  in Guodian Nanjing Automation on October 11, 2024 and sell it today you would lose (35.00) from holding Guodian Nanjing Automation or give up 5.07% of portfolio value over 90 days.

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

Guodian Nanjing Automation  vs.  Jiugui Liquor Co

Guodian Nanjing Auto

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiugui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guodian Nanjing and Jiugui Liquor

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

The idea behind Guodian Nanjing Automation and Jiugui Liquor Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.