Correlation Between Guangzhou Tinci and Shenzhen Topway

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

By analyzing existing cross correlation between Guangzhou Tinci Materials and Shenzhen Topway Video, you can compare the effects of market volatilities on Guangzhou Tinci and Shenzhen Topway 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 Guangzhou Tinci with a short position of Shenzhen Topway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Tinci and Shenzhen Topway.

Diversification Opportunities for Guangzhou Tinci and Shenzhen Topway

0.91

Correlation Coefficient

Guangzhou Tinci  Shenzhen Topway

Almost no diversification

The 3 months correlation between Guangzhou and Shenzhen is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Shenzhen Topway Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Topway Video and Guangzhou Tinci 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 Guangzhou Tinci Materials are associated (or correlated) with Shenzhen Topway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Topway Video has no effect on the direction of Guangzhou Tinci i.e., Guangzhou Tinci and Shenzhen Topway go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Shenzhen Topway

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to generate 1.34 times more return on investment than Shenzhen Topway. However, Guangzhou Tinci is 1.34 times more volatile than Shenzhen Topway Video. It trades about 0.22 of its potential returns per unit of risk. Shenzhen Topway Video is currently generating about 0.19 per unit of risk. If you would invest  1,395  in Guangzhou Tinci Materials on September 2, 2024 and sell it today you would earn a total of  1,074  from holding Guangzhou Tinci Materials or generate 76.99% return on investment over 90 days.

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

Guangzhou Tinci Materials  vs.  Shenzhen Topway Video

Guangzhou Tinci Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Tinci Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Tinci sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Topway Video

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Tinci and Shenzhen Topway

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

The idea behind Guangzhou Tinci Materials and Shenzhen Topway Video 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 Transaction History module to view history of all your transactions and understand their impact on performance.