Correlation Between CEOTRONICS (CEKSG) and Guangdong Investment

Can any of the company-specific risk be diversified away by investing in both CEOTRONICS (CEKSG) and Guangdong Investment 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 CEOTRONICS (CEKSG) and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CEOTRONICS and Guangdong Investment Limited, you can compare the effects of market volatilities on CEOTRONICS (CEKSG) and Guangdong Investment 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 CEOTRONICS (CEKSG) with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEOTRONICS (CEKSG) and Guangdong Investment.

Diversification Opportunities for CEOTRONICS (CEKSG) and Guangdong Investment

0.32

Correlation Coefficient

CEOTRONICS (CEKSG)  Guangdong Investment

Weak diversification

The 3 months correlation between CEOTRONICS and Guangdong is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CEOTRONICS and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and CEOTRONICS (CEKSG) 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 CEOTRONICS are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of CEOTRONICS (CEKSG) i.e., CEOTRONICS (CEKSG) and Guangdong Investment go up and down completely randomly.

Pair Corralation between CEOTRONICS (CEKSG) and Guangdong Investment

Assuming the 90 days trading horizon CEOTRONICS is expected to under-perform the Guangdong Investment. But the stock apears to be less risky and, when comparing its historical volatility, CEOTRONICS is 1.2 times less risky than Guangdong Investment. The stock trades about -0.14 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Guangdong Investment Limited on October 12, 2024 and sell it today you would earn a total of  2.00  from holding Guangdong Investment Limited or generate 2.86% return on investment over 90 days.

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

CEOTRONICS  vs.  Guangdong Investment Limited

CEOTRONICS (CEKSG)

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEOTRONICS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CEOTRONICS (CEKSG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEOTRONICS (CEKSG) and Guangdong Investment

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

The idea behind CEOTRONICS and Guangdong Investment Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.