Correlation Between Guangdong Ellington and China Sports

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

By analyzing existing cross correlation between Guangdong Ellington Electronics and China Sports Industry, you can compare the effects of market volatilities on Guangdong Ellington and China Sports 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 Guangdong Ellington with a short position of China Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Ellington and China Sports.

Diversification Opportunities for Guangdong Ellington and China Sports

0.36

Correlation Coefficient

Guangdong Ellington  China Sports

Weak diversification

The 3 months correlation between Guangdong and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Ellington Electronic and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry and Guangdong Ellington 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 Guangdong Ellington Electronics are associated (or correlated) with China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Guangdong Ellington i.e., Guangdong Ellington and China Sports go up and down completely randomly.

Pair Corralation between Guangdong Ellington and China Sports

Assuming the 90 days trading horizon Guangdong Ellington Electronics is expected to under-perform the China Sports. In addition to that, Guangdong Ellington is 1.09 times more volatile than China Sports Industry. It trades about -0.05 of its total potential returns per unit of risk. China Sports Industry is currently generating about -0.04 per unit of volatility. If you would invest  848.00  in China Sports Industry on October 8, 2024 and sell it today you would lose (81.00) from holding China Sports Industry or give up 9.55% of portfolio value over 90 days.

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

Guangdong Ellington Electronic  vs.  China Sports Industry

Guangdong Ellington

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Ellington Electronics 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.

China Sports Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Sports Industry 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 Guangdong Ellington and China Sports

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

The idea behind Guangdong Ellington Electronics and China Sports Industry 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.