Correlation Between Guotai Epoint and Liuzhou Chemical

Can any of the company-specific risk be diversified away by investing in both Guotai Epoint and Liuzhou 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 Liuzhou 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 Liuzhou Chemical Industry, you can compare the effects of market volatilities on Guotai Epoint and Liuzhou 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 Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Epoint and Liuzhou Chemical.

Diversification Opportunities for Guotai Epoint and Liuzhou Chemical

0.08

Correlation Coefficient

Guotai Epoint  Liuzhou Chemical

Significant diversification

The 3 months correlation between Guotai and Liuzhou is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and Liuzhou Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou 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 Liuzhou Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Chemical Industry has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and Liuzhou Chemical go up and down completely randomly.

Pair Corralation between Guotai Epoint and Liuzhou Chemical

Assuming the 90 days trading horizon Guotai Epoint is expected to generate 2.25 times less return on investment than Liuzhou Chemical. But when comparing it to its historical volatility, Guotai Epoint Software is 1.26 times less risky than Liuzhou Chemical. It trades about 0.04 of its potential returns per unit of risk. Liuzhou Chemical Industry is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  285.00  in Liuzhou Chemical Industry on December 25, 2024 and sell it today you would earn a total of  40.00  from holding Liuzhou Chemical Industry or generate 14.04% return on investment over 90 days.

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

Guotai Epoint Software  vs.  Liuzhou 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.

Liuzhou Chemical Industry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guotai Epoint and Liuzhou Chemical

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

The idea behind Guotai Epoint Software and Liuzhou 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.