Correlation Between Guangdong Marubi and Contemporary Amperex

Can any of the company-specific risk be diversified away by investing in both Guangdong Marubi and Contemporary Amperex 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 Contemporary Amperex 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 Contemporary Amperex Technology, you can compare the effects of market volatilities on Guangdong Marubi and Contemporary Amperex 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 Contemporary Amperex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Marubi and Contemporary Amperex.

Diversification Opportunities for Guangdong Marubi and Contemporary Amperex

0.62

Correlation Coefficient

Guangdong Marubi  Contemporary Amperex

Poor diversification

The 3 months correlation between Guangdong and Contemporary is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Marubi Biotechnology and Contemporary Amperex Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contemporary Amperex 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 Contemporary Amperex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contemporary Amperex has no effect on the direction of Guangdong Marubi i.e., Guangdong Marubi and Contemporary Amperex go up and down completely randomly.

Pair Corralation between Guangdong Marubi and Contemporary Amperex

Assuming the 90 days trading horizon Guangdong Marubi is expected to generate 1.78 times less return on investment than Contemporary Amperex. In addition to that, Guangdong Marubi is 1.04 times more volatile than Contemporary Amperex Technology. It trades about 0.01 of its total potential returns per unit of risk. Contemporary Amperex Technology is currently generating about 0.02 per unit of volatility. If you would invest  23,551  in Contemporary Amperex Technology on October 4, 2024 and sell it today you would earn a total of  3,049  from holding Contemporary Amperex Technology or generate 12.95% return on investment over 90 days.

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

Guangdong Marubi Biotechnology  vs.  Contemporary Amperex Technolog

Guangdong Marubi Bio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Contemporary Amperex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contemporary Amperex Technology 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 Marubi and Contemporary Amperex

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

The idea behind Guangdong Marubi Biotechnology and Contemporary Amperex Technology 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.