Correlation Between Guangzhou Automobile and Qiaoyin Environmental

Can any of the company-specific risk be diversified away by investing in both Guangzhou Automobile and Qiaoyin Environmental 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 Guangzhou Automobile and Qiaoyin Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Automobile Group and Qiaoyin Environmental Tech, you can compare the effects of market volatilities on Guangzhou Automobile and Qiaoyin Environmental 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 Guangzhou Automobile with a short position of Qiaoyin Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Qiaoyin Environmental.

Diversification Opportunities for Guangzhou Automobile and Qiaoyin Environmental

0.23

Correlation Coefficient

Guangzhou Automobile  Qiaoyin Environmental

Modest diversification

The 3 months correlation between Guangzhou and Qiaoyin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Qiaoyin Environmental

Assuming the 90 days trading horizon Guangzhou Automobile Group is expected to under-perform the Qiaoyin Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Automobile Group is 1.15 times less risky than Qiaoyin Environmental. The stock trades about -0.29 of its potential returns per unit of risk. The Qiaoyin Environmental Tech is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,079  in Qiaoyin Environmental Tech on October 8, 2024 and sell it today you would lose (71.00) from holding Qiaoyin Environmental Tech or give up 6.58% of portfolio value over 90 days.

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

Guangzhou Automobile Group  vs.  Qiaoyin Environmental Tech

Guangzhou Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Automobile Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qiaoyin Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qiaoyin Environmental Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qiaoyin Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Automobile and Qiaoyin Environmental

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

The idea behind Guangzhou Automobile Group and Qiaoyin Environmental Tech 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.