Correlation Between Guangxi Wuzhou and Jiangsu Xinning

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

Diversification Opportunities for Guangxi Wuzhou and Jiangsu Xinning

0.01

Correlation Coefficient

Guangxi Wuzhou  Jiangsu Xinning

Significant diversification

The 3 months correlation between Guangxi and Jiangsu is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Guangxi Wuzhou Communications and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern 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 Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Guangxi Wuzhou i.e., Guangxi Wuzhou and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Guangxi Wuzhou and Jiangsu Xinning

Assuming the 90 days trading horizon Guangxi Wuzhou Communications is expected to under-perform the Jiangsu Xinning. But the stock apears to be less risky and, when comparing its historical volatility, Guangxi Wuzhou Communications is 1.15 times less risky than Jiangsu Xinning. The stock trades about -0.07 of its potential returns per unit of risk. The Jiangsu Xinning Modern is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Jiangsu Xinning Modern on December 30, 2024 and sell it today you would lose (13.00) from holding Jiangsu Xinning Modern or give up 3.59% of portfolio value over 90 days.

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

Guangxi Wuzhou Communications  vs.  Jiangsu Xinning Modern

Guangxi Wuzhou Commu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangxi Wuzhou Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jiangsu Xinning Modern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Xinning Modern has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangsu Xinning 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 Jiangsu Xinning

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

The idea behind Guangxi Wuzhou Communications and Jiangsu Xinning Modern 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.