Correlation Between Guangdong Banbao and China Sports

Can any of the company-specific risk be diversified away by investing in both Guangdong Banbao 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 Banbao 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 Banbao Toy and China Sports Industry, you can compare the effects of market volatilities on Guangdong Banbao 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 Banbao with a short position of China Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Banbao and China Sports.

Diversification Opportunities for Guangdong Banbao and China Sports

0.47

Correlation Coefficient

Guangdong Banbao  China Sports

Very weak diversification

The 3 months correlation between Guangdong and China is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Banbao Toy 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 Banbao 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 Banbao Toy 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 Banbao i.e., Guangdong Banbao and China Sports go up and down completely randomly.

Pair Corralation between Guangdong Banbao and China Sports

Assuming the 90 days trading horizon Guangdong Banbao Toy is expected to generate 2.02 times more return on investment than China Sports. However, Guangdong Banbao is 2.02 times more volatile than China Sports Industry. It trades about 0.04 of its potential returns per unit of risk. China Sports Industry is currently generating about 0.01 per unit of risk. If you would invest  1,992  in Guangdong Banbao Toy on October 24, 2024 and sell it today you would earn a total of  79.00  from holding Guangdong Banbao Toy or generate 3.97% return on investment over 90 days.

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

Guangdong Banbao Toy  vs.  China Sports Industry

Guangdong Banbao Toy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Banbao Toy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Banbao may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 somewhat strong basic indicators, China Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Banbao and China Sports

The main advantage of trading using opposite Guangdong Banbao and China Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Banbao 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 Banbao Toy 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.