Correlation Between Chengdu B and Guobo Electronics

Can any of the company-specific risk be diversified away by investing in both Chengdu B and Guobo Electronics 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 Chengdu B and Guobo Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu B ray Media and Guobo Electronics Co, you can compare the effects of market volatilities on Chengdu B and Guobo Electronics 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 Chengdu B with a short position of Guobo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu B and Guobo Electronics.

Diversification Opportunities for Chengdu B and Guobo Electronics

0.01

Correlation Coefficient

Chengdu B  Guobo Electronics

Significant diversification

The 3 months correlation between Chengdu and Guobo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media and Guobo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guobo Electronics and Chengdu B 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 Chengdu B ray Media are associated (or correlated) with Guobo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guobo Electronics has no effect on the direction of Chengdu B i.e., Chengdu B and Guobo Electronics go up and down completely randomly.

Pair Corralation between Chengdu B and Guobo Electronics

Assuming the 90 days trading horizon Chengdu B ray Media is expected to generate 3.06 times more return on investment than Guobo Electronics. However, Chengdu B is 3.06 times more volatile than Guobo Electronics Co. It trades about -0.03 of its potential returns per unit of risk. Guobo Electronics Co is currently generating about -0.1 per unit of risk. If you would invest  509.00  in Chengdu B ray Media on October 3, 2024 and sell it today you would lose (35.00) from holding Chengdu B ray Media or give up 6.88% of portfolio value over 90 days.

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

Chengdu B ray Media  vs.  Guobo Electronics Co

Chengdu B ray

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guobo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guobo Electronics Co 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 Chengdu B and Guobo Electronics

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

The idea behind Chengdu B ray Media and Guobo Electronics Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.