Correlation Between Hefei Metalforming and Guangzhou Zhujiang

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

By analyzing existing cross correlation between Hefei Metalforming Mach and Guangzhou Zhujiang Brewery, you can compare the effects of market volatilities on Hefei Metalforming and Guangzhou Zhujiang 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 Hefei Metalforming with a short position of Guangzhou Zhujiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hefei Metalforming and Guangzhou Zhujiang.

Diversification Opportunities for Hefei Metalforming and Guangzhou Zhujiang

0.56

Correlation Coefficient

Hefei Metalforming  Guangzhou Zhujiang

Very weak diversification

The 3 months correlation between Hefei and Guangzhou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hefei Metalforming Mach and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang and Hefei Metalforming 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 Hefei Metalforming Mach are associated (or correlated) with Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Hefei Metalforming i.e., Hefei Metalforming and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Hefei Metalforming and Guangzhou Zhujiang

Assuming the 90 days trading horizon Hefei Metalforming Mach is expected to generate 1.65 times more return on investment than Guangzhou Zhujiang. However, Hefei Metalforming is 1.65 times more volatile than Guangzhou Zhujiang Brewery. It trades about 0.2 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.08 per unit of risk. If you would invest  555.00  in Hefei Metalforming Mach on September 12, 2024 and sell it today you would earn a total of  264.00  from holding Hefei Metalforming Mach or generate 47.57% return on investment over 90 days.

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

Hefei Metalforming Mach  vs.  Guangzhou Zhujiang Brewery

Hefei Metalforming Mach

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hefei Metalforming Mach are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hefei Metalforming sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Zhujiang

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Zhujiang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hefei Metalforming and Guangzhou Zhujiang

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

The idea behind Hefei Metalforming Mach and Guangzhou Zhujiang Brewery 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.