Correlation Between Dongxing Sec and Guobo Electronics

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

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

Diversification Opportunities for Dongxing Sec and Guobo Electronics

0.34

Correlation Coefficient

Dongxing Sec  Guobo Electronics

Weak diversification

The 3 months correlation between Dongxing and Guobo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co and Guobo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guobo Electronics and Dongxing Sec 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 Dongxing Sec Co 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 Dongxing Sec i.e., Dongxing Sec and Guobo Electronics go up and down completely randomly.

Pair Corralation between Dongxing Sec and Guobo Electronics

Assuming the 90 days trading horizon Dongxing Sec Co is expected to under-perform the Guobo Electronics. In addition to that, Dongxing Sec is 1.12 times more volatile than Guobo Electronics Co. It trades about -0.3 of its total potential returns per unit of risk. Guobo Electronics Co is currently generating about -0.19 per unit of volatility. If you would invest  4,984  in Guobo Electronics Co on October 8, 2024 and sell it today you would lose (424.00) from holding Guobo Electronics Co or give up 8.51% of portfolio value over 90 days.

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

Dongxing Sec Co  vs.  Guobo Electronics Co

Dongxing Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongxing Sec Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dongxing Sec and Guobo Electronics

The main advantage of trading using opposite Dongxing Sec and Guobo Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongxing Sec 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 Dongxing Sec Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.