Correlation Between Guangdong Cellwise and China Union

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

By analyzing existing cross correlation between Guangdong Cellwise Microelectronics and China Union Holdings, you can compare the effects of market volatilities on Guangdong Cellwise and China Union 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 Cellwise with a short position of China Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Cellwise and China Union.

Diversification Opportunities for Guangdong Cellwise and China Union

0.86

Correlation Coefficient

Guangdong Cellwise  China Union

Very poor diversification

The 3 months correlation between Guangdong and China is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Cellwise Microelectr and China Union Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Union Holdings and Guangdong Cellwise 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 Cellwise Microelectronics are associated (or correlated) with China Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Union Holdings has no effect on the direction of Guangdong Cellwise i.e., Guangdong Cellwise and China Union go up and down completely randomly.

Pair Corralation between Guangdong Cellwise and China Union

Assuming the 90 days trading horizon Guangdong Cellwise Microelectronics is expected to generate 1.35 times more return on investment than China Union. However, Guangdong Cellwise is 1.35 times more volatile than China Union Holdings. It trades about 0.2 of its potential returns per unit of risk. China Union Holdings is currently generating about 0.15 per unit of risk. If you would invest  2,980  in Guangdong Cellwise Microelectronics on September 23, 2024 and sell it today you would earn a total of  2,391  from holding Guangdong Cellwise Microelectronics or generate 80.23% return on investment over 90 days.

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

Guangdong Cellwise Microelectr  vs.  China Union Holdings

Guangdong Cellwise

Risk-Adjusted Performance

15 of 100

Good

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

China Union Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Union Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Union sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Cellwise and China Union

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

The idea behind Guangdong Cellwise Microelectronics and China Union Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.