Correlation Between Industrial and Guangdong Brandmax

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

Diversification Opportunities for Industrial and Guangdong Brandmax

0.73

Correlation Coefficient

Industrial  Guangdong Brandmax

Poor diversification

The 3 months correlation between Industrial and Guangdong is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Guangdong Brandmax Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Brandmax 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 Guangdong Brandmax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Brandmax has no effect on the direction of Industrial i.e., Industrial and Guangdong Brandmax go up and down completely randomly.

Pair Corralation between Industrial and Guangdong Brandmax

Assuming the 90 days trading horizon Industrial is expected to generate 3.62 times less return on investment than Guangdong Brandmax. But when comparing it to its historical volatility, Industrial and Commercial is 3.09 times less risky than Guangdong Brandmax. It trades about 0.16 of its potential returns per unit of risk. Guangdong Brandmax Marketing is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  665.00  in Guangdong Brandmax Marketing on September 12, 2024 and sell it today you would earn a total of  351.00  from holding Guangdong Brandmax Marketing or generate 52.78% return on investment over 90 days.

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

Industrial and Commercial  vs.  Guangdong Brandmax Marketing

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Brandmax

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Industrial and Guangdong Brandmax

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

The idea behind Industrial and Commercial and Guangdong Brandmax Marketing 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.