Correlation Between Shanghai Ziyan and Guangzhou Jinyi

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

By analyzing existing cross correlation between Shanghai Ziyan Foods and Guangzhou Jinyi Media, you can compare the effects of market volatilities on Shanghai Ziyan and Guangzhou Jinyi 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 Shanghai Ziyan with a short position of Guangzhou Jinyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Ziyan and Guangzhou Jinyi.

Diversification Opportunities for Shanghai Ziyan and Guangzhou Jinyi

0.62

Correlation Coefficient

Shanghai Ziyan  Guangzhou Jinyi

Poor diversification

The 3 months correlation between Shanghai and Guangzhou is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Ziyan Foods and Guangzhou Jinyi Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jinyi Media and Shanghai Ziyan 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 Shanghai Ziyan Foods are associated (or correlated) with Guangzhou Jinyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jinyi Media has no effect on the direction of Shanghai Ziyan i.e., Shanghai Ziyan and Guangzhou Jinyi go up and down completely randomly.

Pair Corralation between Shanghai Ziyan and Guangzhou Jinyi

Assuming the 90 days trading horizon Shanghai Ziyan Foods is expected to under-perform the Guangzhou Jinyi. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Ziyan Foods is 1.44 times less risky than Guangzhou Jinyi. The stock trades about -0.03 of its potential returns per unit of risk. The Guangzhou Jinyi Media is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  864.00  in Guangzhou Jinyi Media on October 25, 2024 and sell it today you would lose (96.00) from holding Guangzhou Jinyi Media or give up 11.11% of portfolio value over 90 days.

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

Shanghai Ziyan Foods  vs.  Guangzhou Jinyi Media

Shanghai Ziyan Foods

Risk-Adjusted Performance

1 of 100

Very Weak

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

Guangzhou Jinyi Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jinyi Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jinyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Ziyan and Guangzhou Jinyi

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

The idea behind Shanghai Ziyan Foods and Guangzhou Jinyi Media 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..