Correlation Between Guangdong Liantai and HUAQIN TECHNOLOGY

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

By analyzing existing cross correlation between Guangdong Liantai Environmental and HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Guangdong Liantai and HUAQIN 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 Guangdong Liantai with a short position of HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and HUAQIN TECHNOLOGY.

Diversification Opportunities for Guangdong Liantai and HUAQIN TECHNOLOGY

0.94

Correlation Coefficient

Guangdong Liantai  HUAQIN TECHNOLOGY

Almost no diversification

The 3 months correlation between Guangdong and HUAQIN is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD and Guangdong Liantai 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 Liantai Environmental are associated (or correlated) with HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Guangdong Liantai and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to generate 0.62 times more return on investment than HUAQIN TECHNOLOGY. However, Guangdong Liantai Environmental is 1.62 times less risky than HUAQIN TECHNOLOGY. It trades about 0.1 of its potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.04 per unit of risk. If you would invest  430.00  in Guangdong Liantai Environmental on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Guangdong Liantai Environmental or generate 3.95% return on investment over 90 days.

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

Guangdong Liantai Environmenta  vs.  HUAQIN TECHNOLOGY LTD

Guangdong Liantai

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Liantai Environmental are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Liantai sustained solid returns over the last few months and may actually be approaching a breakup point.

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Guangdong Liantai and HUAQIN TECHNOLOGY

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

The idea behind Guangdong Liantai Environmental and HUAQIN TECHNOLOGY LTD 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.