Correlation Between Industrial and Guangzhou KDT

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

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

Diversification Opportunities for Industrial and Guangzhou KDT

0.18

Correlation Coefficient

Industrial  Guangzhou KDT

Average diversification

The 3 months correlation between Industrial and Guangzhou is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Guangzhou KDT Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KDT Machinery and Industrial 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 Industrial and Commercial are associated (or correlated) with Guangzhou KDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KDT Machinery has no effect on the direction of Industrial i.e., Industrial and Guangzhou KDT go up and down completely randomly.

Pair Corralation between Industrial and Guangzhou KDT

Assuming the 90 days trading horizon Industrial and Commercial is expected to under-perform the Guangzhou KDT. But the stock apears to be less risky and, when comparing its historical volatility, Industrial and Commercial is 1.47 times less risky than Guangzhou KDT. The stock trades about -0.02 of its potential returns per unit of risk. The Guangzhou KDT Machinery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,712  in Guangzhou KDT Machinery on December 25, 2024 and sell it today you would earn a total of  178.00  from holding Guangzhou KDT Machinery or generate 10.4% return on investment over 90 days.

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

Industrial and Commercial  vs.  Guangzhou KDT Machinery

Industrial and Commercial

Risk-Adjusted Performance

Weak

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

Guangzhou KDT Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KDT Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou KDT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Industrial and Guangzhou KDT

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

The idea behind Industrial and Commercial and Guangzhou KDT Machinery 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.