Correlation Between Changchun Engley and Guangzhou Automobile

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

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

Diversification Opportunities for Changchun Engley and Guangzhou Automobile

0.64

Correlation Coefficient

Changchun Engley  Guangzhou Automobile

Poor diversification

The 3 months correlation between Changchun and Guangzhou is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Changchun Engley i.e., Changchun Engley and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Changchun Engley and Guangzhou Automobile

Assuming the 90 days trading horizon Changchun Engley Automobile is expected to generate 1.1 times more return on investment than Guangzhou Automobile. However, Changchun Engley is 1.1 times more volatile than Guangzhou Automobile Group. It trades about -0.03 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about -0.12 per unit of risk. If you would invest  398.00  in Changchun Engley Automobile on December 28, 2024 and sell it today you would lose (19.00) from holding Changchun Engley Automobile or give up 4.77% of portfolio value over 90 days.

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

Changchun Engley Automobile  vs.  Guangzhou Automobile Group

Changchun Engley Aut

Risk-Adjusted Performance

Very Weak

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

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Changchun Engley and Guangzhou Automobile

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

The idea behind Changchun Engley Automobile and Guangzhou Automobile Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.