Correlation Between Industrial and Guangzhou Jinyi

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

By analyzing existing cross correlation between Industrial and Commercial and Guangzhou Jinyi Media, you can compare the effects of market volatilities on Industrial and Guangzhou Jinyi 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 Industrial with a short position of Guangzhou Jinyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Guangzhou Jinyi.

Diversification Opportunities for Industrial and Guangzhou Jinyi

0.28

Correlation Coefficient

Industrial  Guangzhou Jinyi

Modest diversification

The 3 months correlation between Industrial and Guangzhou is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Guangzhou Jinyi Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jinyi Media and Industrial 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 Industrial and Commercial are associated (or correlated) with Guangzhou Jinyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jinyi Media has no effect on the direction of Industrial i.e., Industrial and Guangzhou Jinyi go up and down completely randomly.

Pair Corralation between Industrial and Guangzhou Jinyi

Assuming the 90 days trading horizon Industrial is expected to generate 6.41 times less return on investment than Guangzhou Jinyi. But when comparing it to its historical volatility, Industrial and Commercial is 2.05 times less risky than Guangzhou Jinyi. It trades about 0.05 of its potential returns per unit of risk. Guangzhou Jinyi Media is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  572.00  in Guangzhou Jinyi Media on August 31, 2024 and sell it today you would earn a total of  184.00  from holding Guangzhou Jinyi Media or generate 32.17% return on investment over 90 days.

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

Industrial and Commercial  vs.  Guangzhou Jinyi Media

Industrial and Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Jinyi Media

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Industrial and Guangzhou Jinyi

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

The idea behind Industrial and Commercial and Guangzhou Jinyi Media 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.