Correlation Between Good Finance and China Bills

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

By analyzing existing cross correlation between Good Finance Securities and China Bills Finance, you can compare the effects of market volatilities on Good Finance and China Bills 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 Good Finance with a short position of China Bills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Good Finance and China Bills.

Diversification Opportunities for Good Finance and China Bills

-0.13

Correlation Coefficient

Good Finance  China Bills

Good diversification

The 3 months correlation between Good and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Good Finance Securities and China Bills Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Bills Finance and Good Finance 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 Good Finance Securities are associated (or correlated) with China Bills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Bills Finance has no effect on the direction of Good Finance i.e., Good Finance and China Bills go up and down completely randomly.

Pair Corralation between Good Finance and China Bills

Assuming the 90 days trading horizon Good Finance Securities is expected to generate 5.69 times more return on investment than China Bills. However, Good Finance is 5.69 times more volatile than China Bills Finance. It trades about 0.05 of its potential returns per unit of risk. China Bills Finance is currently generating about 0.08 per unit of risk. If you would invest  2,245  in Good Finance Securities on September 18, 2024 and sell it today you would earn a total of  120.00  from holding Good Finance Securities or generate 5.35% return on investment over 90 days.

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

Good Finance Securities  vs.  China Bills Finance

Good Finance Securities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Finance Securities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Good Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Bills Finance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Bills Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Bills is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Good Finance and China Bills

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

The idea behind Good Finance Securities and China Bills Finance 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.