Correlation Between Guobo Electronics and Shanghai Broadband

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

Diversification Opportunities for Guobo Electronics and Shanghai Broadband

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Guobo and Shanghai is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Guobo Electronics Co and Shanghai Broadband Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Broadband 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 Shanghai Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Broadband has no effect on the direction of Guobo Electronics i.e., Guobo Electronics and Shanghai Broadband go up and down completely randomly.

Pair Corralation between Guobo Electronics and Shanghai Broadband

Assuming the 90 days trading horizon Guobo Electronics Co is expected to generate 1.87 times more return on investment than Shanghai Broadband. However, Guobo Electronics is 1.87 times more volatile than Shanghai Broadband Technology. It trades about 0.14 of its potential returns per unit of risk. Shanghai Broadband Technology is currently generating about 0.14 per unit of risk. If you would invest  3,359  in Guobo Electronics Co on September 20, 2024 and sell it today you would earn a total of  1,390  from holding Guobo Electronics Co or generate 41.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Guobo Electronics Co  vs.  Shanghai Broadband Technology

 Performance 
       Timeline  
Guobo Electronics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Guobo Electronics Co are ranked lower than 10 (%) 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.
Shanghai Broadband 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Broadband Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Guobo Electronics and Shanghai Broadband Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guobo Electronics and Shanghai Broadband

The main advantage of trading using opposite Guobo Electronics and Shanghai Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guobo Electronics position performs unexpectedly, Shanghai Broadband 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 Shanghai Broadband will offset losses from the drop in Shanghai Broadband's long position.
The idea behind Guobo Electronics Co and Shanghai Broadband Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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