Correlation Between XinJiang GuoTong and Guangzhou Shangpin

Can any of the company-specific risk be diversified away by investing in both XinJiang GuoTong and Guangzhou Shangpin 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 XinJiang GuoTong and Guangzhou Shangpin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XinJiang GuoTong Pipeline and Guangzhou Shangpin Home, you can compare the effects of market volatilities on XinJiang GuoTong and Guangzhou Shangpin 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 XinJiang GuoTong with a short position of Guangzhou Shangpin. Check out your portfolio center. Please also check ongoing floating volatility patterns of XinJiang GuoTong and Guangzhou Shangpin.

Diversification Opportunities for XinJiang GuoTong and Guangzhou Shangpin

0.85

Correlation Coefficient

XinJiang GuoTong  Guangzhou Shangpin

Very poor diversification

The 3 months correlation between XinJiang and Guangzhou is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding XinJiang GuoTong Pipeline and Guangzhou Shangpin Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Shangpin Home and XinJiang GuoTong 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 XinJiang GuoTong Pipeline are associated (or correlated) with Guangzhou Shangpin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Shangpin Home has no effect on the direction of XinJiang GuoTong i.e., XinJiang GuoTong and Guangzhou Shangpin go up and down completely randomly.

Pair Corralation between XinJiang GuoTong and Guangzhou Shangpin

Assuming the 90 days trading horizon XinJiang GuoTong is expected to generate 1.27 times less return on investment than Guangzhou Shangpin. But when comparing it to its historical volatility, XinJiang GuoTong Pipeline is 1.4 times less risky than Guangzhou Shangpin. It trades about 0.23 of its potential returns per unit of risk. Guangzhou Shangpin Home is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  949.00  in Guangzhou Shangpin Home on September 14, 2024 and sell it today you would earn a total of  671.00  from holding Guangzhou Shangpin Home or generate 70.71% return on investment over 90 days.

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

XinJiang GuoTong Pipeline  vs.  Guangzhou Shangpin Home

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XinJiang GuoTong Pipeline are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XinJiang GuoTong sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Shangpin Home

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Shangpin Home are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Shangpin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XinJiang GuoTong and Guangzhou Shangpin

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

The idea behind XinJiang GuoTong Pipeline and Guangzhou Shangpin Home 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.