Correlation Between Guangdong Wens and Keda Clean

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

By analyzing existing cross correlation between Guangdong Wens Foodstuff and Keda Clean Energy, you can compare the effects of market volatilities on Guangdong Wens and Keda Clean 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 Wens with a short position of Keda Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Wens and Keda Clean.

Diversification Opportunities for Guangdong Wens and Keda Clean

0.65

Correlation Coefficient

Guangdong Wens  Keda Clean

Poor diversification

The 3 months correlation between Guangdong and Keda is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy and Guangdong Wens 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 Wens Foodstuff are associated (or correlated) with Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and Keda Clean go up and down completely randomly.

Pair Corralation between Guangdong Wens and Keda Clean

Assuming the 90 days trading horizon Guangdong Wens is expected to generate 1.56 times less return on investment than Keda Clean. In addition to that, Guangdong Wens is 1.08 times more volatile than Keda Clean Energy. It trades about 0.06 of its total potential returns per unit of risk. Keda Clean Energy is currently generating about 0.11 per unit of volatility. If you would invest  725.00  in Keda Clean Energy on September 12, 2024 and sell it today you would earn a total of  123.00  from holding Keda Clean Energy or generate 16.97% return on investment over 90 days.

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

Guangdong Wens Foodstuff  vs.  Keda Clean Energy

Guangdong Wens Foodstuff

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Wens Foodstuff are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Wens sustained solid returns over the last few months and may actually be approaching a breakup point.

Keda Clean Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keda Clean Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keda Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Wens and Keda Clean

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

The idea behind Guangdong Wens Foodstuff and Keda Clean Energy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.