Correlation Between Industrial and Guangdong Ellington

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

Diversification Opportunities for Industrial and Guangdong Ellington

0.18

Correlation Coefficient

Industrial  Guangdong Ellington

Average diversification

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

Pair Corralation between Industrial and Guangdong Ellington

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.38 times more return on investment than Guangdong Ellington. However, Industrial and Commercial is 2.64 times less risky than Guangdong Ellington. It trades about 0.07 of its potential returns per unit of risk. Guangdong Ellington Electronics is currently generating about 0.02 per unit of risk. If you would invest  616.00  in Industrial and Commercial on October 24, 2024 and sell it today you would earn a total of  28.00  from holding Industrial and Commercial or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Industrial and Commercial  vs.  Guangdong Ellington Electronic

Industrial and Commercial

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Guangdong Ellington

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Ellington Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangdong Ellington is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial and Guangdong Ellington

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

The idea behind Industrial and Commercial and Guangdong Ellington Electronics 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.