Correlation Between Bangyan Technology and Guangdong Skychem

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

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

Diversification Opportunities for Bangyan Technology and Guangdong Skychem

0.34

Correlation Coefficient

Bangyan Technology  Guangdong Skychem

Weak diversification

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

Pair Corralation between Bangyan Technology and Guangdong Skychem

Assuming the 90 days trading horizon Bangyan Technology Co is expected to under-perform the Guangdong Skychem. But the stock apears to be less risky and, when comparing its historical volatility, Bangyan Technology Co is 1.44 times less risky than Guangdong Skychem. The stock trades about -0.02 of its potential returns per unit of risk. The Guangdong Skychem Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,452  in Guangdong Skychem Technology on October 21, 2024 and sell it today you would earn a total of  2,256  from holding Guangdong Skychem Technology or generate 41.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.85%
Values	Daily Returns

Bangyan Technology Co  vs.  Guangdong Skychem Technology

Bangyan Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guangdong Skychem

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Bangyan Technology and Guangdong Skychem

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

The idea behind Bangyan Technology Co and Guangdong Skychem 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.