Correlation Between Guangxi Wuzhou and Hunan Investment

Can any of the company-specific risk be diversified away by investing in both Guangxi Wuzhou and Hunan Investment 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 Guangxi Wuzhou and Hunan Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangxi Wuzhou Communications and Hunan Investment Group, you can compare the effects of market volatilities on Guangxi Wuzhou and Hunan Investment 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 Guangxi Wuzhou with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangxi Wuzhou and Hunan Investment.

Diversification Opportunities for Guangxi Wuzhou and Hunan Investment

0.59

Correlation Coefficient

Guangxi Wuzhou  Hunan Investment

Very weak diversification

The 3 months correlation between Guangxi and Hunan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Guangxi Wuzhou Communications and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Guangxi Wuzhou 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 Guangxi Wuzhou Communications are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Guangxi Wuzhou i.e., Guangxi Wuzhou and Hunan Investment go up and down completely randomly.

Pair Corralation between Guangxi Wuzhou and Hunan Investment

Assuming the 90 days trading horizon Guangxi Wuzhou Communications is expected to generate 1.61 times more return on investment than Hunan Investment. However, Guangxi Wuzhou is 1.61 times more volatile than Hunan Investment Group. It trades about 0.42 of its potential returns per unit of risk. Hunan Investment Group is currently generating about -0.29 per unit of risk. If you would invest  383.00  in Guangxi Wuzhou Communications on September 26, 2024 and sell it today you would earn a total of  176.00  from holding Guangxi Wuzhou Communications or generate 45.95% return on investment over 90 days.

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

Guangxi Wuzhou Communications  vs.  Hunan Investment Group

Guangxi Wuzhou Commu

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangxi Wuzhou Communications are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangxi Wuzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Investment

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangxi Wuzhou and Hunan Investment

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

The idea behind Guangxi Wuzhou Communications and Hunan Investment Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.