Correlation Between Zhangjiagang Freetrade and Guangdong Brandmax

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

By analyzing existing cross correlation between Zhangjiagang Freetrade Science and Guangdong Brandmax Marketing, you can compare the effects of market volatilities on Zhangjiagang Freetrade and Guangdong Brandmax 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 Zhangjiagang Freetrade with a short position of Guangdong Brandmax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Guangdong Brandmax.

Diversification Opportunities for Zhangjiagang Freetrade and Guangdong Brandmax

-0.07

Correlation Coefficient

Zhangjiagang Freetrade  Guangdong Brandmax

Good diversification

The 3 months correlation between Zhangjiagang and Guangdong is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science and Guangdong Brandmax Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Brandmax and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science are associated (or correlated) with Guangdong Brandmax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Brandmax has no effect on the direction of Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Guangdong Brandmax go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Guangdong Brandmax

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to under-perform the Guangdong Brandmax. But the stock apears to be less risky and, when comparing its historical volatility, Zhangjiagang Freetrade Science is 3.7 times less risky than Guangdong Brandmax. The stock trades about -0.17 of its potential returns per unit of risk. The Guangdong Brandmax Marketing is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  993.00  in Guangdong Brandmax Marketing on December 1, 2024 and sell it today you would earn a total of  73.00  from holding Guangdong Brandmax Marketing or generate 7.35% return on investment over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Guangdong Brandmax Marketing

Zhangjiagang Freetrade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhangjiagang Freetrade Science 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.

Guangdong Brandmax

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Brandmax Marketing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Brandmax sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhangjiagang Freetrade and Guangdong Brandmax

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

The idea behind Zhangjiagang Freetrade Science and Guangdong Brandmax Marketing 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.