Correlation Between Ye Chiu and Guangzhou Shangpin

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

By analyzing existing cross correlation between Ye Chiu Metal and Guangzhou Shangpin Home, you can compare the effects of market volatilities on Ye Chiu and Guangzhou Shangpin 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 Ye Chiu with a short position of Guangzhou Shangpin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ye Chiu and Guangzhou Shangpin.

Diversification Opportunities for Ye Chiu and Guangzhou Shangpin

0.86

Correlation Coefficient

Ye Chiu  Guangzhou Shangpin

Very poor diversification

The 3 months correlation between 601388 and Guangzhou is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ye Chiu Metal and Guangzhou Shangpin Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Shangpin Home and Ye Chiu 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 Ye Chiu Metal are associated (or correlated) with Guangzhou Shangpin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Shangpin Home has no effect on the direction of Ye Chiu i.e., Ye Chiu and Guangzhou Shangpin go up and down completely randomly.

Pair Corralation between Ye Chiu and Guangzhou Shangpin

Assuming the 90 days trading horizon Ye Chiu is expected to generate 1.54 times less return on investment than Guangzhou Shangpin. But when comparing it to its historical volatility, Ye Chiu Metal is 1.67 times less risky than Guangzhou Shangpin. It trades about 0.18 of its potential returns per unit of risk. Guangzhou Shangpin Home is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  992.00  in Guangzhou Shangpin Home on September 5, 2024 and sell it today you would earn a total of  503.00  from holding Guangzhou Shangpin Home or generate 50.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Ye Chiu Metal  vs.  Guangzhou Shangpin Home

Ye Chiu Metal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ye Chiu Metal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ye Chiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Shangpin Home

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Shangpin Home are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Shangpin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ye Chiu and Guangzhou Shangpin

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

The idea behind Ye Chiu Metal and Guangzhou Shangpin Home 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.