Correlation Between Guobo Electronics and Hengyi Petrochemical

Can any of the company-specific risk be diversified away by investing in both Guobo Electronics and Hengyi Petrochemical 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 Guobo Electronics and Hengyi Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guobo Electronics Co and Hengyi Petrochemical Co, you can compare the effects of market volatilities on Guobo Electronics and Hengyi Petrochemical 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 Guobo Electronics with a short position of Hengyi Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guobo Electronics and Hengyi Petrochemical.

Diversification Opportunities for Guobo Electronics and Hengyi Petrochemical

0.77

Correlation Coefficient

Guobo Electronics  Hengyi Petrochemical

Poor diversification

The 3 months correlation between Guobo and Hengyi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guobo Electronics Co and Hengyi Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengyi Petrochemical and Guobo Electronics 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 Guobo Electronics Co are associated (or correlated) with Hengyi Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengyi Petrochemical has no effect on the direction of Guobo Electronics i.e., Guobo Electronics and Hengyi Petrochemical go up and down completely randomly.

Pair Corralation between Guobo Electronics and Hengyi Petrochemical

If you would invest  3,685  in Guobo Electronics Co on September 26, 2024 and sell it today you would earn a total of  1,114  from holding Guobo Electronics Co or generate 30.23% return on investment over 90 days.

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

Guobo Electronics Co  vs.  Hengyi Petrochemical Co

Guobo Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guobo Electronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guobo Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Hengyi Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guobo Electronics and Hengyi Petrochemical

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

The idea behind Guobo Electronics Co and Hengyi Petrochemical 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.