Correlation Between Western Superconducting and Guangzhou Zhujiang

Can any of the company-specific risk be diversified away by investing in both Western Superconducting and Guangzhou Zhujiang 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 Western Superconducting and Guangzhou Zhujiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Superconducting Tech and Guangzhou Zhujiang Brewery, you can compare the effects of market volatilities on Western Superconducting and Guangzhou Zhujiang 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 Western Superconducting with a short position of Guangzhou Zhujiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Superconducting and Guangzhou Zhujiang.

Diversification Opportunities for Western Superconducting and Guangzhou Zhujiang

-0.34

Correlation Coefficient

Western Superconducting  Guangzhou Zhujiang

Very good diversification

The 3 months correlation between Western and Guangzhou is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Western Superconducting Tech and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang and Western Superconducting 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 Western Superconducting Tech are associated (or correlated) with Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Western Superconducting i.e., Western Superconducting and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Western Superconducting and Guangzhou Zhujiang

Assuming the 90 days trading horizon Western Superconducting Tech is expected to generate 1.22 times more return on investment than Guangzhou Zhujiang. However, Western Superconducting is 1.22 times more volatile than Guangzhou Zhujiang Brewery. It trades about -0.02 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about -0.08 per unit of risk. If you would invest  4,383  in Western Superconducting Tech on October 20, 2024 and sell it today you would lose (38.00) from holding Western Superconducting Tech or give up 0.87% of portfolio value over 90 days.

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

Western Superconducting Tech  vs.  Guangzhou Zhujiang Brewery

Western Superconducting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Superconducting Tech 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.

Guangzhou Zhujiang

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Superconducting and Guangzhou Zhujiang

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

The idea behind Western Superconducting Tech and Guangzhou Zhujiang Brewery 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.