Correlation Between Guotai Junan and Kuangda Technology

Can any of the company-specific risk be diversified away by investing in both Guotai Junan and Kuangda Technology 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 Guotai Junan and Kuangda Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guotai Junan Securities and Kuangda Technology Group, you can compare the effects of market volatilities on Guotai Junan and Kuangda Technology 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 Guotai Junan with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Junan and Kuangda Technology.

Diversification Opportunities for Guotai Junan and Kuangda Technology

0.73

Correlation Coefficient

Guotai Junan  Kuangda Technology

Poor diversification

The 3 months correlation between Guotai and Kuangda is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Junan Securities and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Guotai Junan 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 Guotai Junan Securities are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Guotai Junan i.e., Guotai Junan and Kuangda Technology go up and down completely randomly.

Pair Corralation between Guotai Junan and Kuangda Technology

Assuming the 90 days trading horizon Guotai Junan Securities is expected to generate 0.71 times more return on investment than Kuangda Technology. However, Guotai Junan Securities is 1.41 times less risky than Kuangda Technology. It trades about 0.17 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.09 per unit of risk. If you would invest  1,470  in Guotai Junan Securities on September 30, 2024 and sell it today you would earn a total of  425.00  from holding Guotai Junan Securities or generate 28.91% return on investment over 90 days.

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

Guotai Junan Securities  vs.  Kuangda Technology Group

Guotai Junan Securities

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guotai Junan Securities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guotai Junan sustained solid returns over the last few months and may actually be approaching a breakup point.

Kuangda Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuangda Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guotai Junan and Kuangda Technology

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

The idea behind Guotai Junan Securities and Kuangda Technology Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.