Correlation Between Guangzhou Boji and Shaanxi Broadcast

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

By analyzing existing cross correlation between Guangzhou Boji Medical and Shaanxi Broadcast TV, you can compare the effects of market volatilities on Guangzhou Boji and Shaanxi Broadcast 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 Boji with a short position of Shaanxi Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Boji and Shaanxi Broadcast.

Diversification Opportunities for Guangzhou Boji and Shaanxi Broadcast

0.84

Correlation Coefficient

Guangzhou Boji  Shaanxi Broadcast

Very poor diversification

The 3 months correlation between Guangzhou and Shaanxi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Boji Medical and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast and Guangzhou Boji 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 Boji Medical are associated (or correlated) with Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Guangzhou Boji i.e., Guangzhou Boji and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Guangzhou Boji and Shaanxi Broadcast

Assuming the 90 days trading horizon Guangzhou Boji is expected to generate 1.19 times less return on investment than Shaanxi Broadcast. In addition to that, Guangzhou Boji is 1.42 times more volatile than Shaanxi Broadcast TV. It trades about 0.16 of its total potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about 0.28 per unit of volatility. If you would invest  202.00  in Shaanxi Broadcast TV on September 12, 2024 and sell it today you would earn a total of  105.00  from holding Shaanxi Broadcast TV or generate 51.98% return on investment over 90 days.

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

Guangzhou Boji Medical  vs.  Shaanxi Broadcast TV

Guangzhou Boji Medical

Risk-Adjusted Performance

12 of 100

Good

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

Shaanxi Broadcast

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangzhou Boji and Shaanxi Broadcast

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

The idea behind Guangzhou Boji Medical and Shaanxi Broadcast TV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.