Correlation Between Guangdong Cellwise and Shenyang Chemical

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

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

Diversification Opportunities for Guangdong Cellwise and Shenyang Chemical

0.61

Correlation Coefficient

Guangdong Cellwise  Shenyang Chemical

Poor diversification

The 3 months correlation between Guangdong and Shenyang is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Cellwise Microelectr and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and Guangdong Cellwise 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 Guangdong Cellwise Microelectronics are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of Guangdong Cellwise i.e., Guangdong Cellwise and Shenyang Chemical go up and down completely randomly.

Pair Corralation between Guangdong Cellwise and Shenyang Chemical

Assuming the 90 days trading horizon Guangdong Cellwise Microelectronics is expected to generate 1.29 times more return on investment than Shenyang Chemical. However, Guangdong Cellwise is 1.29 times more volatile than Shenyang Chemical Industry. It trades about 0.03 of its potential returns per unit of risk. Shenyang Chemical Industry is currently generating about 0.02 per unit of risk. If you would invest  4,776  in Guangdong Cellwise Microelectronics on October 4, 2024 and sell it today you would earn a total of  184.00  from holding Guangdong Cellwise Microelectronics or generate 3.85% return on investment over 90 days.

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

Guangdong Cellwise Microelectr  vs.  Shenyang Chemical Industry

Guangdong Cellwise

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Cellwise Microelectronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Cellwise may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenyang Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenyang Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Cellwise and Shenyang Chemical

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

The idea behind Guangdong Cellwise Microelectronics and Shenyang 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.