Correlation Between Guotai Junan and Integrated Electronic

Can any of the company-specific risk be diversified away by investing in both Guotai Junan and Integrated Electronic 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 Integrated Electronic 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 Integrated Electronic Systems, you can compare the effects of market volatilities on Guotai Junan and Integrated Electronic 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 Integrated Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Junan and Integrated Electronic.

Diversification Opportunities for Guotai Junan and Integrated Electronic

0.24

Correlation Coefficient

Guotai Junan  Integrated Electronic

Modest diversification

The 3 months correlation between Guotai and Integrated is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Junan Securities and Integrated Electronic Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Electronic 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 Integrated Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Electronic has no effect on the direction of Guotai Junan i.e., Guotai Junan and Integrated Electronic go up and down completely randomly.

Pair Corralation between Guotai Junan and Integrated Electronic

Assuming the 90 days trading horizon Guotai Junan Securities is expected to generate 0.28 times more return on investment than Integrated Electronic. However, Guotai Junan Securities is 3.55 times less risky than Integrated Electronic. It trades about -0.3 of its potential returns per unit of risk. Integrated Electronic Systems is currently generating about -0.13 per unit of risk. If you would invest  1,928  in Guotai Junan Securities on October 7, 2024 and sell it today you would lose (171.00) from holding Guotai Junan Securities or give up 8.87% of portfolio value over 90 days.

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

Guotai Junan Securities  vs.  Integrated Electronic Systems

Guotai Junan Securities

Risk-Adjusted Performance

9 of 100

OK

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

Integrated Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Electronic Systems 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 Guotai Junan and Integrated Electronic

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

The idea behind Guotai Junan Securities and Integrated Electronic Systems 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.