Correlation Between Great Wall and Grape King

Can any of the company-specific risk be diversified away by investing in both Great Wall and Grape King 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 Great Wall and Grape King into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Wall Enterprise and Grape King Bio, you can compare the effects of market volatilities on Great Wall and Grape King 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 Great Wall with a short position of Grape King. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Grape King.

Diversification Opportunities for Great Wall and Grape King

0.61

Correlation Coefficient

Great Wall  Grape King

Poor diversification

The 3 months correlation between Great and Grape is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Grape King Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grape King Bio and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Grape King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grape King Bio has no effect on the direction of Great Wall i.e., Great Wall and Grape King go up and down completely randomly.

Pair Corralation between Great Wall and Grape King

Assuming the 90 days trading horizon Great Wall is expected to generate 2.03 times less return on investment than Grape King. But when comparing it to its historical volatility, Great Wall Enterprise is 1.3 times less risky than Grape King. It trades about 0.08 of its potential returns per unit of risk. Grape King Bio is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14,400  in Grape King Bio on September 14, 2024 and sell it today you would earn a total of  1,050  from holding Grape King Bio or generate 7.29% return on investment over 90 days.

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

Great Wall Enterprise  vs.  Grape King Bio

Great Wall Enterprise

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Enterprise are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great Wall is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Grape King Bio

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grape King Bio are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grape King may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Great Wall and Grape King

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

The idea behind Great Wall Enterprise and Grape King Bio 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.