Correlation Between Guizhou BroadcastingTV and Shanghai Lingyun

Can any of the company-specific risk be diversified away by investing in both Guizhou BroadcastingTV and Shanghai Lingyun 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 Guizhou BroadcastingTV and Shanghai Lingyun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guizhou BroadcastingTV Info and Shanghai Lingyun Industries, you can compare the effects of market volatilities on Guizhou BroadcastingTV and Shanghai Lingyun 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 Guizhou BroadcastingTV with a short position of Shanghai Lingyun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guizhou BroadcastingTV and Shanghai Lingyun.

Diversification Opportunities for Guizhou BroadcastingTV and Shanghai Lingyun

0.89

Correlation Coefficient

Guizhou BroadcastingTV  Shanghai Lingyun

Very poor diversification

The 3 months correlation between Guizhou and Shanghai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Guizhou BroadcastingTV Info and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind and Guizhou BroadcastingTV 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 Guizhou BroadcastingTV Info are associated (or correlated) with Shanghai Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of Guizhou BroadcastingTV i.e., Guizhou BroadcastingTV and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between Guizhou BroadcastingTV and Shanghai Lingyun

Assuming the 90 days trading horizon Guizhou BroadcastingTV is expected to generate 1.42 times less return on investment than Shanghai Lingyun. But when comparing it to its historical volatility, Guizhou BroadcastingTV Info is 1.47 times less risky than Shanghai Lingyun. It trades about 0.18 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Shanghai Lingyun Industries on September 12, 2024 and sell it today you would earn a total of  13.00  from holding Shanghai Lingyun Industries or generate 48.15% return on investment over 90 days.

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

Guizhou BroadcastingTV Info  vs.  Shanghai Lingyun Industries

Guizhou BroadcastingTV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guizhou BroadcastingTV Info are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guizhou BroadcastingTV sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Lingyun Ind

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Lingyun Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Lingyun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guizhou BroadcastingTV and Shanghai Lingyun

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

The idea behind Guizhou BroadcastingTV Info and Shanghai Lingyun Industries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.