Correlation Between Panda Financial and Guangdong Tianhe

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

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

Diversification Opportunities for Panda Financial and Guangdong Tianhe

0.86

Correlation Coefficient

Panda Financial  Guangdong Tianhe

Very poor diversification

The 3 months correlation between Panda and Guangdong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and Guangdong Tianhe Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Tianhe Agr and Panda Financial 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 Panda Financial Holding are associated (or correlated) with Guangdong Tianhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Tianhe Agr has no effect on the direction of Panda Financial i.e., Panda Financial and Guangdong Tianhe go up and down completely randomly.

Pair Corralation between Panda Financial and Guangdong Tianhe

Assuming the 90 days trading horizon Panda Financial Holding is expected to generate 1.01 times more return on investment than Guangdong Tianhe. However, Panda Financial is 1.01 times more volatile than Guangdong Tianhe Agricultural. It trades about 0.02 of its potential returns per unit of risk. Guangdong Tianhe Agricultural is currently generating about -0.05 per unit of risk. If you would invest  1,232  in Panda Financial Holding on October 7, 2024 and sell it today you would lose (3.00) from holding Panda Financial Holding or give up 0.24% of portfolio value over 90 days.

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

Panda Financial Holding  vs.  Guangdong Tianhe Agricultural

Panda Financial Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guangdong Tianhe Agr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Tianhe Agricultural 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.

Pair Trading with Panda Financial and Guangdong Tianhe

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

The idea behind Panda Financial Holding and Guangdong Tianhe Agricultural 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.