Correlation Between Guangxi Wuzhou and PKU HealthCare

Can any of the company-specific risk be diversified away by investing in both Guangxi Wuzhou and PKU HealthCare 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 PKU HealthCare 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 PKU HealthCare Corp, you can compare the effects of market volatilities on Guangxi Wuzhou and PKU HealthCare 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 PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangxi Wuzhou and PKU HealthCare.

Diversification Opportunities for Guangxi Wuzhou and PKU HealthCare

0.36

Correlation Coefficient

Guangxi Wuzhou  PKU HealthCare

Weak diversification

The 3 months correlation between Guangxi and PKU is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Guangxi Wuzhou Communications and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp 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 PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Guangxi Wuzhou i.e., Guangxi Wuzhou and PKU HealthCare go up and down completely randomly.

Pair Corralation between Guangxi Wuzhou and PKU HealthCare

Assuming the 90 days trading horizon Guangxi Wuzhou Communications is expected to under-perform the PKU HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Guangxi Wuzhou Communications is 1.23 times less risky than PKU HealthCare. The stock trades about -0.33 of its potential returns per unit of risk. The PKU HealthCare Corp is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  744.00  in PKU HealthCare Corp on October 25, 2024 and sell it today you would lose (160.00) from holding PKU HealthCare Corp or give up 21.51% of portfolio value over 90 days.

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

Guangxi Wuzhou Communications  vs.  PKU HealthCare Corp

Guangxi Wuzhou Commu

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangxi Wuzhou Communications are ranked lower than 6 (%) 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.

PKU HealthCare Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guangxi Wuzhou and PKU HealthCare

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

The idea behind Guangxi Wuzhou Communications and PKU HealthCare Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.