Correlation Between Guangzhou Automobile and Neway Valve

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

Diversification Opportunities for Guangzhou Automobile and Neway Valve

0.34

Correlation Coefficient

Guangzhou Automobile  Neway Valve

Weak diversification

The 3 months correlation between Guangzhou and Neway is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Neway Valve suzhou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neway Valve suzhou 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 Neway Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neway Valve suzhou has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Neway Valve go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Neway Valve

Assuming the 90 days trading horizon Guangzhou Automobile is expected to generate 1.13 times less return on investment than Neway Valve. In addition to that, Guangzhou Automobile is 1.18 times more volatile than Neway Valve suzhou. It trades about 0.02 of its total potential returns per unit of risk. Neway Valve suzhou is currently generating about 0.03 per unit of volatility. If you would invest  2,475  in Neway Valve suzhou on October 27, 2024 and sell it today you would earn a total of  67.00  from holding Neway Valve suzhou or generate 2.71% 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.  Neway Valve suzhou

Guangzhou Automobile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Neway Valve suzhou

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neway Valve suzhou are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Neway Valve 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 Neway Valve

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

The idea behind Guangzhou Automobile Group and Neway Valve suzhou 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.