Correlation Between Guotai Epoint and Nanning Chemical

Can any of the company-specific risk be diversified away by investing in both Guotai Epoint and Nanning Chemical 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 Guotai Epoint and Nanning Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guotai Epoint Software and Nanning Chemical Industry, you can compare the effects of market volatilities on Guotai Epoint and Nanning Chemical 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 Guotai Epoint with a short position of Nanning Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Epoint and Nanning Chemical.

Diversification Opportunities for Guotai Epoint and Nanning Chemical

0.41

Correlation Coefficient

Guotai Epoint  Nanning Chemical

Very weak diversification

The 3 months correlation between Guotai and Nanning is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and Nanning Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanning Chemical Industry and Guotai Epoint 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 Guotai Epoint Software are associated (or correlated) with Nanning Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanning Chemical Industry has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and Nanning Chemical go up and down completely randomly.

Pair Corralation between Guotai Epoint and Nanning Chemical

Assuming the 90 days trading horizon Guotai Epoint is expected to generate 3.85 times less return on investment than Nanning Chemical. In addition to that, Guotai Epoint is 1.15 times more volatile than Nanning Chemical Industry. It trades about 0.04 of its total potential returns per unit of risk. Nanning Chemical Industry is currently generating about 0.2 per unit of volatility. If you would invest  1,765  in Nanning Chemical Industry on December 26, 2024 and sell it today you would earn a total of  630.00  from holding Nanning Chemical Industry or generate 35.69% return on investment over 90 days.

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

Guotai Epoint Software  vs.  Nanning Chemical Industry

Guotai Epoint Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guotai Epoint Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guotai Epoint may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nanning Chemical Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanning Chemical Industry are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanning Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guotai Epoint and Nanning Chemical

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

The idea behind Guotai Epoint Software and Nanning Chemical Industry 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.