Correlation Between Ping An and Guangzhou Hongli

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

By analyzing existing cross correlation between Ping An Insurance and Guangzhou Hongli Opto, you can compare the effects of market volatilities on Ping An and Guangzhou Hongli 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 Ping An with a short position of Guangzhou Hongli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Guangzhou Hongli.

Diversification Opportunities for Ping An and Guangzhou Hongli

0.92

Correlation Coefficient

Ping An  Guangzhou Hongli

Almost no diversification

The 3 months correlation between Ping and Guangzhou is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Guangzhou Hongli Opto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Hongli Opto and Ping An 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 Ping An Insurance are associated (or correlated) with Guangzhou Hongli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Hongli Opto has no effect on the direction of Ping An i.e., Ping An and Guangzhou Hongli go up and down completely randomly.

Pair Corralation between Ping An and Guangzhou Hongli

Assuming the 90 days trading horizon Ping An is expected to generate 1.33 times less return on investment than Guangzhou Hongli. But when comparing it to its historical volatility, Ping An Insurance is 1.58 times less risky than Guangzhou Hongli. It trades about 0.08 of its potential returns per unit of risk. Guangzhou Hongli Opto is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  573.00  in Guangzhou Hongli Opto on December 10, 2024 and sell it today you would earn a total of  137.00  from holding Guangzhou Hongli Opto or generate 23.91% return on investment over 90 days.

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

Ping An Insurance  vs.  Guangzhou Hongli Opto

Ping An Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ping An Insurance 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.

Guangzhou Hongli Opto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Hongli Opto 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.

Pair Trading with Ping An and Guangzhou Hongli

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

The idea behind Ping An Insurance and Guangzhou Hongli Opto 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.