Correlation Between Guangdong Liantai and Olympic Circuit

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Can any of the company-specific risk be diversified away by investing in both Guangdong Liantai and Olympic Circuit 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 Olympic Circuit 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 Olympic Circuit Technology, you can compare the effects of market volatilities on Guangdong Liantai and Olympic Circuit 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 Olympic Circuit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Olympic Circuit.

Diversification Opportunities for Guangdong Liantai and Olympic Circuit

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Guangdong and Olympic is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Olympic Circuit Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Circuit Tech 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 Olympic Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Circuit Tech has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and Olympic Circuit go up and down completely randomly.

Pair Corralation between Guangdong Liantai and Olympic Circuit

Assuming the 90 days trading horizon Guangdong Liantai is expected to generate 1.35 times less return on investment than Olympic Circuit. But when comparing it to its historical volatility, Guangdong Liantai Environmental is 1.81 times less risky than Olympic Circuit. It trades about 0.22 of its potential returns per unit of risk. Olympic Circuit Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,168  in Olympic Circuit Technology on September 6, 2024 and sell it today you would earn a total of  1,046  from holding Olympic Circuit Technology or generate 48.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Guangdong Liantai Environmenta  vs.  Olympic Circuit Technology

 Performance 
       Timeline  
Guangdong Liantai 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Liantai Environmental are ranked lower than 17 (%) 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.
Olympic Circuit Tech 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Circuit Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Olympic Circuit sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Liantai and Olympic Circuit Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangdong Liantai and Olympic Circuit

The main advantage of trading using opposite Guangdong Liantai and Olympic Circuit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Liantai position performs unexpectedly, Olympic Circuit 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 Olympic Circuit will offset losses from the drop in Olympic Circuit's long position.
The idea behind Guangdong Liantai Environmental and Olympic Circuit Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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