Correlation Between National Silicon and Guilin Seamild

Can any of the company-specific risk be diversified away by investing in both National Silicon and Guilin Seamild 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 National Silicon and Guilin Seamild into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Silicon Industry and Guilin Seamild Foods, you can compare the effects of market volatilities on National Silicon and Guilin Seamild 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 National Silicon with a short position of Guilin Seamild. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Silicon and Guilin Seamild.

Diversification Opportunities for National Silicon and Guilin Seamild

0.04

Correlation Coefficient

National Silicon  Guilin Seamild

Significant diversification

The 3 months correlation between National and Guilin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and National Silicon 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 National Silicon Industry are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of National Silicon i.e., National Silicon and Guilin Seamild go up and down completely randomly.

Pair Corralation between National Silicon and Guilin Seamild

Assuming the 90 days trading horizon National Silicon Industry is expected to under-perform the Guilin Seamild. In addition to that, National Silicon is 1.21 times more volatile than Guilin Seamild Foods. It trades about -0.02 of its total potential returns per unit of risk. Guilin Seamild Foods is currently generating about -0.01 per unit of volatility. If you would invest  1,658  in Guilin Seamild Foods on December 27, 2024 and sell it today you would lose (46.00) from holding Guilin Seamild Foods or give up 2.77% of portfolio value over 90 days.

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

National Silicon Industry  vs.  Guilin Seamild Foods

National Silicon Industry

Risk-Adjusted Performance

Very Weak

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

Guilin Seamild Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with National Silicon and Guilin Seamild

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

The idea behind National Silicon Industry and Guilin Seamild Foods 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.