Correlation Between Guodian Nanjing and HUAQIN TECHNOLOGY

Can any of the company-specific risk be diversified away by investing in both Guodian Nanjing and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Guodian Nanjing and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guodian Nanjing and HUAQIN TECHNOLOGY.

Diversification Opportunities for Guodian Nanjing and HUAQIN TECHNOLOGY

0.86

Correlation Coefficient

Guodian Nanjing  HUAQIN TECHNOLOGY

Very poor diversification

The 3 months correlation between Guodian and HUAQIN is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guodian Nanjing Automation and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD 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 HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Guodian Nanjing i.e., Guodian Nanjing and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Guodian Nanjing and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Guodian Nanjing is expected to generate 1.46 times less return on investment than HUAQIN TECHNOLOGY. But when comparing it to its historical volatility, Guodian Nanjing Automation is 1.39 times less risky than HUAQIN TECHNOLOGY. It trades about 0.18 of its potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,599  in HUAQIN TECHNOLOGY LTD on September 12, 2024 and sell it today you would earn a total of  1,732  from holding HUAQIN TECHNOLOGY LTD or generate 37.66% return on investment over 90 days.

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

Guodian Nanjing Automation  vs.  HUAQIN TECHNOLOGY LTD

Guodian Nanjing Auto

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guodian Nanjing Automation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guodian Nanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guodian Nanjing and HUAQIN TECHNOLOGY

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

The idea behind Guodian Nanjing Automation and HUAQIN TECHNOLOGY LTD 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.