Correlation Between China National and Guangzhou Jointas

Can any of the company-specific risk be diversified away by investing in both China National and Guangzhou Jointas 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 China National and Guangzhou Jointas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China National Medicines and Guangzhou Jointas Chemical, you can compare the effects of market volatilities on China National and Guangzhou Jointas 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 China National with a short position of Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of China National and Guangzhou Jointas.

Diversification Opportunities for China National and Guangzhou Jointas

0.04

Correlation Coefficient

China National  Guangzhou Jointas

Significant diversification

The 3 months correlation between China and Guangzhou is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China National Medicines and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas and China National 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 China National Medicines are associated (or correlated) with Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of China National i.e., China National and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between China National and Guangzhou Jointas

Assuming the 90 days trading horizon China National Medicines is expected to under-perform the Guangzhou Jointas. But the stock apears to be less risky and, when comparing its historical volatility, China National Medicines is 1.38 times less risky than Guangzhou Jointas. The stock trades about -0.15 of its potential returns per unit of risk. The Guangzhou Jointas Chemical is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Guangzhou Jointas Chemical on December 26, 2024 and sell it today you would earn a total of  87.00  from holding Guangzhou Jointas Chemical or generate 17.09% return on investment over 90 days.

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

China National Medicines  vs.  Guangzhou Jointas Chemical

China National Medicines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China National Medicines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guangzhou Jointas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China National and Guangzhou Jointas

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

The idea behind China National Medicines and Guangzhou Jointas Chemical 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..