Correlation Between Guangdong Marubi and Chengdu Spaceon

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

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

Diversification Opportunities for Guangdong Marubi and Chengdu Spaceon

0.46

Correlation Coefficient

Guangdong Marubi  Chengdu Spaceon

Very weak diversification

The 3 months correlation between Guangdong and Chengdu is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Marubi Biotechnology and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec and Guangdong Marubi 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 Marubi Biotechnology are associated (or correlated) with Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Guangdong Marubi i.e., Guangdong Marubi and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Guangdong Marubi and Chengdu Spaceon

Assuming the 90 days trading horizon Guangdong Marubi Biotechnology is expected to generate 1.0 times more return on investment than Chengdu Spaceon. However, Guangdong Marubi Biotechnology is 1.0 times less risky than Chengdu Spaceon. It trades about 0.1 of its potential returns per unit of risk. Chengdu Spaceon Electronics is currently generating about 0.03 per unit of risk. If you would invest  2,833  in Guangdong Marubi Biotechnology on October 11, 2024 and sell it today you would earn a total of  510.00  from holding Guangdong Marubi Biotechnology or generate 18.0% return on investment over 90 days.

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

Guangdong Marubi Biotechnology  vs.  Chengdu Spaceon Electronics

Guangdong Marubi Bio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Spaceon Elec

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Spaceon Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chengdu Spaceon 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 Marubi and Chengdu Spaceon

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

The idea behind Guangdong Marubi Biotechnology and Chengdu Spaceon Electronics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.