Correlation Between Guangzhou Jointas and Strait Innovation

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

By analyzing existing cross correlation between Guangzhou Jointas Chemical and Strait Innovation Internet, you can compare the effects of market volatilities on Guangzhou Jointas and Strait Innovation 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 Jointas with a short position of Strait Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Jointas and Strait Innovation.

Diversification Opportunities for Guangzhou Jointas and Strait Innovation

0.96

Correlation Coefficient

Guangzhou Jointas  Strait Innovation

Almost no diversification

The 3 months correlation between Guangzhou and Strait is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Jointas Chemical and Strait Innovation Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strait Innovation and Guangzhou Jointas 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 Jointas Chemical are associated (or correlated) with Strait Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strait Innovation has no effect on the direction of Guangzhou Jointas i.e., Guangzhou Jointas and Strait Innovation go up and down completely randomly.

Pair Corralation between Guangzhou Jointas and Strait Innovation

Assuming the 90 days trading horizon Guangzhou Jointas Chemical is expected to under-perform the Strait Innovation. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Jointas Chemical is 1.02 times less risky than Strait Innovation. The stock trades about -0.13 of its potential returns per unit of risk. The Strait Innovation Internet is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Strait Innovation Internet on September 25, 2024 and sell it today you would lose (15.00) from holding Strait Innovation Internet or give up 4.93% of portfolio value over 90 days.

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

Guangzhou Jointas Chemical  vs.  Strait Innovation Internet

Guangzhou Jointas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Strait Innovation

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Guangzhou Jointas and Strait Innovation

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

The idea behind Guangzhou Jointas Chemical and Strait Innovation Internet 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 Anywhere module to track or share privately all of your investments from the convenience of any device.