Correlation Between Xingguang Agricultural and Guangdong Cellwise

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

By analyzing existing cross correlation between Xingguang Agricultural Mach and Guangdong Cellwise Microelectronics, you can compare the effects of market volatilities on Xingguang Agricultural and Guangdong Cellwise 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 Xingguang Agricultural with a short position of Guangdong Cellwise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xingguang Agricultural and Guangdong Cellwise.

Diversification Opportunities for Xingguang Agricultural and Guangdong Cellwise

0.56

Correlation Coefficient

Xingguang Agricultural  Guangdong Cellwise

Very weak diversification

The 3 months correlation between Xingguang and Guangdong is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Guangdong Cellwise Microelectr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Cellwise and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with Guangdong Cellwise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Cellwise has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Guangdong Cellwise go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Guangdong Cellwise

Assuming the 90 days trading horizon Xingguang Agricultural is expected to generate 3.32 times less return on investment than Guangdong Cellwise. But when comparing it to its historical volatility, Xingguang Agricultural Mach is 1.28 times less risky than Guangdong Cellwise. It trades about 0.03 of its potential returns per unit of risk. Guangdong Cellwise Microelectronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,031  in Guangdong Cellwise Microelectronics on October 8, 2024 and sell it today you would earn a total of  1,378  from holding Guangdong Cellwise Microelectronics or generate 45.46% return on investment over 90 days.

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

Xingguang Agricultural Mach  vs.  Guangdong Cellwise Microelectr

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xingguang Agricultural Mach has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xingguang Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangdong Cellwise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Cellwise Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Cellwise is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xingguang Agricultural and Guangdong Cellwise

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

The idea behind Xingguang Agricultural Mach and Guangdong Cellwise Microelectronics 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.