Correlation Between Guotai Junan and Gem-Year Industrial

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

Diversification Opportunities for Guotai Junan and Gem-Year Industrial

0.1

Correlation Coefficient

Guotai Junan  Gem-Year Industrial

Average diversification

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

Pair Corralation between Guotai Junan and Gem-Year Industrial

Assuming the 90 days trading horizon Guotai Junan Securities is expected to under-perform the Gem-Year Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Guotai Junan Securities is 1.36 times less risky than Gem-Year Industrial. The stock trades about -0.07 of its potential returns per unit of risk. The Gem Year Industrial Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Gem Year Industrial Co on December 24, 2024 and sell it today you would earn a total of  66.00  from holding Gem Year Industrial Co or generate 14.7% 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.  Gem Year Industrial Co

Guotai Junan Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guotai Junan Securities 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.

Gem Year Industrial

Risk-Adjusted Performance

OK

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

Pair Trading with Guotai Junan and Gem-Year Industrial

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

The idea behind Guotai Junan Securities and Gem Year Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.