Correlation Between Guotai Junan and Tieling Newcity

Can any of the company-specific risk be diversified away by investing in both Guotai Junan and Tieling Newcity 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 Guotai Junan and Tieling Newcity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guotai Junan Securities and Tieling Newcity Investment, you can compare the effects of market volatilities on Guotai Junan and Tieling Newcity 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 Guotai Junan with a short position of Tieling Newcity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Junan and Tieling Newcity.

Diversification Opportunities for Guotai Junan and Tieling Newcity

0.1

Correlation Coefficient

Guotai Junan  Tieling Newcity

Average diversification

The 3 months correlation between Guotai and Tieling is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Junan Securities and Tieling Newcity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tieling Newcity Inve and Guotai Junan 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 Guotai Junan Securities are associated (or correlated) with Tieling Newcity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tieling Newcity Inve has no effect on the direction of Guotai Junan i.e., Guotai Junan and Tieling Newcity go up and down completely randomly.

Pair Corralation between Guotai Junan and Tieling Newcity

Assuming the 90 days trading horizon Guotai Junan is expected to generate 3.94 times less return on investment than Tieling Newcity. But when comparing it to its historical volatility, Guotai Junan Securities is 1.11 times less risky than Tieling Newcity. It trades about 0.07 of its potential returns per unit of risk. Tieling Newcity Investment is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  221.00  in Tieling Newcity Investment on October 10, 2024 and sell it today you would earn a total of  110.00  from holding Tieling Newcity Investment or generate 49.77% return on investment over 90 days.

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

Guotai Junan Securities  vs.  Tieling Newcity Investment

Guotai Junan Securities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guotai Junan Securities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guotai Junan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tieling Newcity Inve

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guotai Junan and Tieling Newcity

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

The idea behind Guotai Junan Securities and Tieling Newcity Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.