Correlation Between Guangdong Shenglu and Eastroc Beverage

Can any of the company-specific risk be diversified away by investing in both Guangdong Shenglu and Eastroc Beverage 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 Guangdong Shenglu and Eastroc Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Shenglu Telecommunication and Eastroc Beverage Group, you can compare the effects of market volatilities on Guangdong Shenglu and Eastroc Beverage 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 Guangdong Shenglu with a short position of Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and Eastroc Beverage.

Diversification Opportunities for Guangdong Shenglu and Eastroc Beverage

0.9

Correlation Coefficient

Guangdong Shenglu  Eastroc Beverage

Almost no diversification

The 3 months correlation between Guangdong and Eastroc is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage and Guangdong Shenglu 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 Guangdong Shenglu Telecommunication are associated (or correlated) with Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Eastroc Beverage

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to generate 1.51 times more return on investment than Eastroc Beverage. However, Guangdong Shenglu is 1.51 times more volatile than Eastroc Beverage Group. It trades about 0.16 of its potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.18 per unit of risk. If you would invest  557.00  in Guangdong Shenglu Telecommunication on September 5, 2024 and sell it today you would earn a total of  178.00  from holding Guangdong Shenglu Telecommunication or generate 31.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.28%
Values	Daily Returns

Guangdong Shenglu Telecommunic  vs.  Eastroc Beverage Group

Guangdong Shenglu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Shenglu sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Shenglu and Eastroc Beverage

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

The idea behind Guangdong Shenglu Telecommunication and Eastroc Beverage Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.