Correlation Between Guotai Epoint and China Enterprise

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

Diversification Opportunities for Guotai Epoint and China Enterprise

0.79

Correlation Coefficient

Guotai Epoint  China Enterprise

Poor diversification

The 3 months correlation between Guotai and China is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and China Enterprise go up and down completely randomly.

Pair Corralation between Guotai Epoint and China Enterprise

Assuming the 90 days trading horizon Guotai Epoint Software is expected to under-perform the China Enterprise. In addition to that, Guotai Epoint is 1.18 times more volatile than China Enterprise Co. It trades about -0.09 of its total potential returns per unit of risk. China Enterprise Co is currently generating about -0.06 per unit of volatility. If you would invest  298.00  in China Enterprise Co on October 25, 2024 and sell it today you would lose (31.00) from holding China Enterprise Co or give up 10.4% of portfolio value over 90 days.

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

Guotai Epoint Software  vs.  China Enterprise Co

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co 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.

Pair Trading with Guotai Epoint and China Enterprise

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

The idea behind Guotai Epoint Software and China Enterprise Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..