Correlation Between Hangzhou Pinming and GuoChuang Software

Can any of the company-specific risk be diversified away by investing in both Hangzhou Pinming and GuoChuang Software 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 Hangzhou Pinming and GuoChuang Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hangzhou Pinming Software and GuoChuang Software Co, you can compare the effects of market volatilities on Hangzhou Pinming and GuoChuang Software 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 Hangzhou Pinming with a short position of GuoChuang Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Pinming and GuoChuang Software.

Diversification Opportunities for Hangzhou Pinming and GuoChuang Software

0.85

Correlation Coefficient

Hangzhou Pinming  GuoChuang Software

Very poor diversification

The 3 months correlation between Hangzhou and GuoChuang is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Pinming Software and GuoChuang Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuoChuang Software and Hangzhou Pinming 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 Hangzhou Pinming Software are associated (or correlated) with GuoChuang Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuoChuang Software has no effect on the direction of Hangzhou Pinming i.e., Hangzhou Pinming and GuoChuang Software go up and down completely randomly.

Pair Corralation between Hangzhou Pinming and GuoChuang Software

Assuming the 90 days trading horizon Hangzhou Pinming is expected to generate 1.26 times less return on investment than GuoChuang Software. But when comparing it to its historical volatility, Hangzhou Pinming Software is 1.21 times less risky than GuoChuang Software. It trades about 0.05 of its potential returns per unit of risk. GuoChuang Software Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,571  in GuoChuang Software Co on November 29, 2024 and sell it today you would earn a total of  195.00  from holding GuoChuang Software Co or generate 7.58% return on investment over 90 days.

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

Hangzhou Pinming Software  vs.  GuoChuang Software Co

Hangzhou Pinming Software

Risk-Adjusted Performance

Insignificant

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

GuoChuang Software

Risk-Adjusted Performance

Modest

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

Pair Trading with Hangzhou Pinming and GuoChuang Software

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

The idea behind Hangzhou Pinming Software and GuoChuang Software 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.