Correlation Between Kweichow Moutai and Guosheng Financial

Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and Guosheng Financial 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 Kweichow Moutai and Guosheng Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kweichow Moutai Co and Guosheng Financial Holding, you can compare the effects of market volatilities on Kweichow Moutai and Guosheng Financial 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 Kweichow Moutai with a short position of Guosheng Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and Guosheng Financial.

Diversification Opportunities for Kweichow Moutai and Guosheng Financial

-0.03

Correlation Coefficient

Kweichow Moutai  Guosheng Financial

Good diversification

The 3 months correlation between Kweichow and Guosheng is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Guosheng Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guosheng Financial and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with Guosheng Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guosheng Financial has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Guosheng Financial go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Guosheng Financial

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Guosheng Financial. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 4.9 times less risky than Guosheng Financial. The stock trades about -0.1 of its potential returns per unit of risk. The Guosheng Financial Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,286  in Guosheng Financial Holding on October 5, 2024 and sell it today you would lose (34.00) from holding Guosheng Financial Holding or give up 2.64% of portfolio value over 90 days.

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

Kweichow Moutai Co  vs.  Guosheng Financial Holding

Kweichow Moutai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kweichow Moutai Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guosheng Financial

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Kweichow Moutai and Guosheng Financial

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

The idea behind Kweichow Moutai Co and Guosheng Financial Holding 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.