Correlation Between Allgens Medical and Guangdong Shenglu

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Can any of the company-specific risk be diversified away by investing in both Allgens Medical and Guangdong Shenglu 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 Allgens Medical and Guangdong Shenglu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allgens Medical Technology and Guangdong Shenglu Telecommunication, you can compare the effects of market volatilities on Allgens Medical and Guangdong Shenglu 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 Allgens Medical with a short position of Guangdong Shenglu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allgens Medical and Guangdong Shenglu.

Diversification Opportunities for Allgens Medical and Guangdong Shenglu

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Allgens and Guangdong is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Allgens Medical Technology and Guangdong Shenglu Telecommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Shenglu and Allgens Medical 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 Allgens Medical Technology are associated (or correlated) with Guangdong Shenglu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Shenglu has no effect on the direction of Allgens Medical i.e., Allgens Medical and Guangdong Shenglu go up and down completely randomly.

Pair Corralation between Allgens Medical and Guangdong Shenglu

Assuming the 90 days trading horizon Allgens Medical Technology is expected to generate 1.09 times more return on investment than Guangdong Shenglu. However, Allgens Medical is 1.09 times more volatile than Guangdong Shenglu Telecommunication. It trades about -0.09 of its potential returns per unit of risk. Guangdong Shenglu Telecommunication is currently generating about -0.23 per unit of risk. If you would invest  1,891  in Allgens Medical Technology on October 11, 2024 and sell it today you would lose (214.00) from holding Allgens Medical Technology or give up 11.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Allgens Medical Technology  vs.  Guangdong Shenglu Telecommunic

 Performance 
       Timeline  
Allgens Medical Tech 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Allgens Medical Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allgens Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Guangdong Shenglu 

Risk-Adjusted Performance

1 of 100

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

Allgens Medical and Guangdong Shenglu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allgens Medical and Guangdong Shenglu

The main advantage of trading using opposite Allgens Medical and Guangdong Shenglu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allgens Medical position performs unexpectedly, Guangdong Shenglu 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 Guangdong Shenglu will offset losses from the drop in Guangdong Shenglu's long position.
The idea behind Allgens Medical Technology and Guangdong Shenglu Telecommunication 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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