Correlation Between Guobo Electronics and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both Guobo Electronics and Gansu Jiu 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 Gansu Jiu 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 Gansu Jiu Steel, you can compare the effects of market volatilities on Guobo Electronics and Gansu Jiu 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 Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guobo Electronics and Gansu Jiu.

Diversification Opportunities for Guobo Electronics and Gansu Jiu

-0.02

Correlation Coefficient

Guobo Electronics  Gansu Jiu

Good diversification

The 3 months correlation between Guobo and Gansu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Guobo Electronics Co and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel 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 Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Guobo Electronics i.e., Guobo Electronics and Gansu Jiu go up and down completely randomly.

Pair Corralation between Guobo Electronics and Gansu Jiu

Assuming the 90 days trading horizon Guobo Electronics Co is expected to generate 1.51 times more return on investment than Gansu Jiu. However, Guobo Electronics is 1.51 times more volatile than Gansu Jiu Steel. It trades about 0.09 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.03 per unit of risk. If you would invest  4,800  in Guobo Electronics Co on December 26, 2024 and sell it today you would earn a total of  550.00  from holding Guobo Electronics Co or generate 11.46% return on investment over 90 days.

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

Guobo Electronics Co  vs.  Gansu Jiu Steel

Guobo Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guobo Electronics Co are ranked lower than 6 (%) 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.

Gansu Jiu Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Jiu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gansu Jiu 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 Gansu Jiu

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

The idea behind Guobo Electronics Co and Gansu Jiu Steel 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.