Correlation Between Guodian Nanjing and Cultural Investment

Can any of the company-specific risk be diversified away by investing in both Guodian Nanjing and Cultural Investment 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 Guodian Nanjing and Cultural Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guodian Nanjing Automation and Cultural Investment Holdings, you can compare the effects of market volatilities on Guodian Nanjing and Cultural Investment 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 Guodian Nanjing with a short position of Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guodian Nanjing and Cultural Investment.

Diversification Opportunities for Guodian Nanjing and Cultural Investment

0.64

Correlation Coefficient

Guodian Nanjing  Cultural Investment

Poor diversification

The 3 months correlation between Guodian and Cultural is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Guodian Nanjing Automation and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment and Guodian Nanjing 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 Guodian Nanjing Automation are associated (or correlated) with Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Guodian Nanjing i.e., Guodian Nanjing and Cultural Investment go up and down completely randomly.

Pair Corralation between Guodian Nanjing and Cultural Investment

Assuming the 90 days trading horizon Guodian Nanjing is expected to generate 1.38 times less return on investment than Cultural Investment. But when comparing it to its historical volatility, Guodian Nanjing Automation is 1.33 times less risky than Cultural Investment. It trades about 0.14 of its potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  193.00  in Cultural Investment Holdings on September 16, 2024 and sell it today you would earn a total of  52.00  from holding Cultural Investment Holdings or generate 26.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Guodian Nanjing Automation  vs.  Cultural Investment Holdings

Guodian Nanjing Auto

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guodian Nanjing Automation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guodian Nanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

Cultural Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guodian Nanjing and Cultural Investment

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

The idea behind Guodian Nanjing Automation and Cultural Investment Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.