Correlation Between Ming Yang and Guangzhou Automobile

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

By analyzing existing cross correlation between Ming Yang Smart and Guangzhou Automobile Group, you can compare the effects of market volatilities on Ming Yang and Guangzhou Automobile 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 Ming Yang with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and Guangzhou Automobile.

Diversification Opportunities for Ming Yang and Guangzhou Automobile

0.79

Correlation Coefficient

Ming Yang  Guangzhou Automobile

Poor diversification

The 3 months correlation between Ming and Guangzhou is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Ming Yang 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 Ming Yang Smart are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Ming Yang i.e., Ming Yang and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Ming Yang and Guangzhou Automobile

Assuming the 90 days trading horizon Ming Yang Smart is expected to under-perform the Guangzhou Automobile. But the stock apears to be less risky and, when comparing its historical volatility, Ming Yang Smart is 1.26 times less risky than Guangzhou Automobile. The stock trades about -0.15 of its potential returns per unit of risk. The Guangzhou Automobile Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Guangzhou Automobile Group on November 28, 2024 and sell it today you would earn a total of  50.00  from holding Guangzhou Automobile Group or generate 5.92% return on investment over 90 days.

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

Ming Yang Smart  vs.  Guangzhou Automobile Group

Ming Yang Smart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ming Yang Smart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guangzhou Automobile

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Automobile may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Ming Yang and Guangzhou Automobile

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

The idea behind Ming Yang Smart and Guangzhou Automobile Group 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.