Correlation Between Guangdong Liantai and Marssenger Kitchenware

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

By analyzing existing cross correlation between Guangdong Liantai Environmental and Marssenger Kitchenware Co, you can compare the effects of market volatilities on Guangdong Liantai and Marssenger Kitchenware 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 Liantai with a short position of Marssenger Kitchenware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Marssenger Kitchenware.

Diversification Opportunities for Guangdong Liantai and Marssenger Kitchenware

0.71

Correlation Coefficient

Guangdong Liantai  Marssenger Kitchenware

Poor diversification

The 3 months correlation between Guangdong and Marssenger is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Marssenger Kitchenware Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marssenger Kitchenware and Guangdong Liantai 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 Liantai Environmental are associated (or correlated) with Marssenger Kitchenware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marssenger Kitchenware has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and Marssenger Kitchenware go up and down completely randomly.

Pair Corralation between Guangdong Liantai and Marssenger Kitchenware

Assuming the 90 days trading horizon Guangdong Liantai is expected to generate 15.36 times less return on investment than Marssenger Kitchenware. But when comparing it to its historical volatility, Guangdong Liantai Environmental is 3.7 times less risky than Marssenger Kitchenware. It trades about 0.02 of its potential returns per unit of risk. Marssenger Kitchenware Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Marssenger Kitchenware Co on December 2, 2024 and sell it today you would earn a total of  180.00  from holding Marssenger Kitchenware Co or generate 13.25% return on investment over 90 days.

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

Guangdong Liantai Environmenta  vs.  Marssenger Kitchenware Co

Guangdong Liantai

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Liantai Environmental 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.

Marssenger Kitchenware

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marssenger Kitchenware Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Marssenger Kitchenware 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 Liantai and Marssenger Kitchenware

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

The idea behind Guangdong Liantai Environmental and Marssenger Kitchenware Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.