Correlation Between Goodwill E and Sichuan Chuantou

Can any of the company-specific risk be diversified away by investing in both Goodwill E and Sichuan Chuantou 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 Goodwill E and Sichuan Chuantou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goodwill E Health and Sichuan Chuantou Energy, you can compare the effects of market volatilities on Goodwill E and Sichuan Chuantou 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 Goodwill E with a short position of Sichuan Chuantou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodwill E and Sichuan Chuantou.

Diversification Opportunities for Goodwill E and Sichuan Chuantou

-0.74

Correlation Coefficient

Goodwill E  Sichuan Chuantou

Pay attention - limited upside

The 3 months correlation between Goodwill and Sichuan is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Goodwill E Health and Sichuan Chuantou Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Chuantou Energy and Goodwill E 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 Goodwill E Health are associated (or correlated) with Sichuan Chuantou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Chuantou Energy has no effect on the direction of Goodwill E i.e., Goodwill E and Sichuan Chuantou go up and down completely randomly.

Pair Corralation between Goodwill E and Sichuan Chuantou

Assuming the 90 days trading horizon Goodwill E Health is expected to under-perform the Sichuan Chuantou. In addition to that, Goodwill E is 2.03 times more volatile than Sichuan Chuantou Energy. It trades about -0.46 of its total potential returns per unit of risk. Sichuan Chuantou Energy is currently generating about -0.1 per unit of volatility. If you would invest  1,719  in Sichuan Chuantou Energy on October 5, 2024 and sell it today you would lose (51.00) from holding Sichuan Chuantou Energy or give up 2.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Goodwill E Health  vs.  Sichuan Chuantou Energy

Goodwill E Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sichuan Chuantou Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Chuantou Energy 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 Goodwill E and Sichuan Chuantou

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

The idea behind Goodwill E Health and Sichuan Chuantou Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.