Correlation Between Shaanxi Broadcast and Guangzhou Zhujiang

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

By analyzing existing cross correlation between Shaanxi Broadcast TV and Guangzhou Zhujiang Brewery, you can compare the effects of market volatilities on Shaanxi Broadcast and Guangzhou Zhujiang 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 Shaanxi Broadcast with a short position of Guangzhou Zhujiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Broadcast and Guangzhou Zhujiang.

Diversification Opportunities for Shaanxi Broadcast and Guangzhou Zhujiang

0.18

Correlation Coefficient

Shaanxi Broadcast  Guangzhou Zhujiang

Average diversification

The 3 months correlation between Shaanxi and Guangzhou is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Broadcast TV and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang and Shaanxi Broadcast 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 Shaanxi Broadcast TV are associated (or correlated) with Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Shaanxi Broadcast i.e., Shaanxi Broadcast and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Shaanxi Broadcast and Guangzhou Zhujiang

Assuming the 90 days trading horizon Shaanxi Broadcast TV is expected to under-perform the Guangzhou Zhujiang. In addition to that, Shaanxi Broadcast is 1.8 times more volatile than Guangzhou Zhujiang Brewery. It trades about -0.08 of its total potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.05 per unit of volatility. If you would invest  803.00  in Guangzhou Zhujiang Brewery on October 3, 2024 and sell it today you would earn a total of  186.00  from holding Guangzhou Zhujiang Brewery or generate 23.16% return on investment over 90 days.

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

Shaanxi Broadcast TV  vs.  Guangzhou Zhujiang Brewery

Shaanxi Broadcast

Risk-Adjusted Performance

3 of 100

Insignificant

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

Guangzhou Zhujiang

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangzhou Zhujiang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shaanxi Broadcast and Guangzhou Zhujiang

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

The idea behind Shaanxi Broadcast TV and Guangzhou Zhujiang Brewery 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.