Correlation Between Industrial and Guotai Junan

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

Diversification Opportunities for Industrial and Guotai Junan

0.25

Correlation Coefficient

Industrial  Guotai Junan

Modest diversification

The 3 months correlation between Industrial and Guotai is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Guotai Junan Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Junan Securities 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 Guotai Junan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Junan Securities has no effect on the direction of Industrial i.e., Industrial and Guotai Junan go up and down completely randomly.

Pair Corralation between Industrial and Guotai Junan

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.69 times more return on investment than Guotai Junan. However, Industrial and Commercial is 1.44 times less risky than Guotai Junan. It trades about -0.02 of its potential returns per unit of risk. Guotai Junan Securities is currently generating about -0.08 per unit of risk. If you would invest  693.00  in Industrial and Commercial on December 26, 2024 and sell it today you would lose (10.00) from holding Industrial and Commercial or give up 1.44% of portfolio value over 90 days.

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

Industrial and Commercial  vs.  Guotai Junan Securities

Industrial and Commercial

Risk-Adjusted Performance

Very 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.

Guotai Junan Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guotai Junan Securities 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 Industrial and Guotai Junan

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

The idea behind Industrial and Commercial and Guotai Junan Securities 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.