Correlation Between Guangxi Wuzhou and Shanghai Shibei

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

Diversification Opportunities for Guangxi Wuzhou and Shanghai Shibei

0.22

Correlation Coefficient

Guangxi Wuzhou  Shanghai Shibei

Modest diversification

The 3 months correlation between Guangxi and Shanghai is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Guangxi Wuzhou Communications and Shanghai Shibei Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shibei Hi 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 Shanghai Shibei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shibei Hi has no effect on the direction of Guangxi Wuzhou i.e., Guangxi Wuzhou and Shanghai Shibei go up and down completely randomly.

Pair Corralation between Guangxi Wuzhou and Shanghai Shibei

Assuming the 90 days trading horizon Guangxi Wuzhou Communications is expected to under-perform the Shanghai Shibei. In addition to that, Guangxi Wuzhou is 1.12 times more volatile than Shanghai Shibei Hi Tech. It trades about -0.07 of its total potential returns per unit of risk. Shanghai Shibei Hi Tech is currently generating about -0.01 per unit of volatility. If you would invest  495.00  in Shanghai Shibei Hi Tech on December 27, 2024 and sell it today you would lose (14.00) from holding Shanghai Shibei Hi Tech or give up 2.83% 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.  Shanghai Shibei Hi Tech

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.

Shanghai Shibei Hi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Shibei Hi Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Shibei 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 Shanghai Shibei

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

The idea behind Guangxi Wuzhou Communications and Shanghai Shibei Hi Tech 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.