Correlation Between Chongqing Rural and Guilin Seamild

Can any of the company-specific risk be diversified away by investing in both Chongqing Rural and Guilin Seamild 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 Chongqing Rural and Guilin Seamild into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Rural Commercial and Guilin Seamild Foods, you can compare the effects of market volatilities on Chongqing Rural and Guilin Seamild 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 Chongqing Rural with a short position of Guilin Seamild. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Rural and Guilin Seamild.

Diversification Opportunities for Chongqing Rural and Guilin Seamild

0.35

Correlation Coefficient

Chongqing Rural  Guilin Seamild

Weak diversification

The 3 months correlation between Chongqing and Guilin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Rural Commercial and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and Chongqing Rural 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 Chongqing Rural Commercial are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Chongqing Rural i.e., Chongqing Rural and Guilin Seamild go up and down completely randomly.

Pair Corralation between Chongqing Rural and Guilin Seamild

Assuming the 90 days trading horizon Chongqing Rural is expected to generate 1.66 times less return on investment than Guilin Seamild. But when comparing it to its historical volatility, Chongqing Rural Commercial is 1.17 times less risky than Guilin Seamild. It trades about 0.09 of its potential returns per unit of risk. Guilin Seamild Foods is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,369  in Guilin Seamild Foods on October 4, 2024 and sell it today you would earn a total of  298.00  from holding Guilin Seamild Foods or generate 21.77% return on investment over 90 days.

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

Chongqing Rural Commercial  vs.  Guilin Seamild Foods

Chongqing Rural Comm

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Rural sustained solid returns over the last few months and may actually be approaching a breakup point.

Guilin Seamild Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Rural and Guilin Seamild

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

The idea behind Chongqing Rural Commercial and Guilin Seamild Foods 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.