Correlation Between Guangzhou Automobile and Yingde Greatchem

Can any of the company-specific risk be diversified away by investing in both Guangzhou Automobile and Yingde Greatchem 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 Yingde Greatchem 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 Yingde Greatchem Chemicals, you can compare the effects of market volatilities on Guangzhou Automobile and Yingde Greatchem 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 Yingde Greatchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Yingde Greatchem.

Diversification Opportunities for Guangzhou Automobile and Yingde Greatchem

0.29

Correlation Coefficient

Guangzhou Automobile  Yingde Greatchem

Modest diversification

The 3 months correlation between Guangzhou and Yingde is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che 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 Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Yingde Greatchem

Assuming the 90 days trading horizon Guangzhou Automobile Group is expected to under-perform the Yingde Greatchem. In addition to that, Guangzhou Automobile is 1.16 times more volatile than Yingde Greatchem Chemicals. It trades about -0.09 of its total potential returns per unit of risk. Yingde Greatchem Chemicals is currently generating about 0.05 per unit of volatility. If you would invest  2,304  in Yingde Greatchem Chemicals on December 26, 2024 and sell it today you would earn a total of  83.00  from holding Yingde Greatchem Chemicals or generate 3.6% return on investment over 90 days.

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

Guangzhou Automobile Group  vs.  Yingde Greatchem Chemicals

Guangzhou Automobile

Risk-Adjusted Performance

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 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.

Yingde Greatchem Che

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yingde Greatchem 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 Yingde Greatchem

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

The idea behind Guangzhou Automobile Group and Yingde Greatchem Chemicals 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..