Correlation Between Shanghai Suochen and Guotai Junan

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

By analyzing existing cross correlation between Shanghai Suochen Information and Guotai Junan Securities, you can compare the effects of market volatilities on Shanghai Suochen and Guotai Junan 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 Shanghai Suochen with a short position of Guotai Junan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Suochen and Guotai Junan.

Diversification Opportunities for Shanghai Suochen and Guotai Junan

0.41

Correlation Coefficient

Shanghai Suochen  Guotai Junan

Very weak diversification

The 3 months correlation between Shanghai and Guotai is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Suochen Information and Guotai Junan Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Junan Securities and Shanghai Suochen 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 Shanghai Suochen Information are associated (or correlated) with Guotai Junan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Junan Securities has no effect on the direction of Shanghai Suochen i.e., Shanghai Suochen and Guotai Junan go up and down completely randomly.

Pair Corralation between Shanghai Suochen and Guotai Junan

Assuming the 90 days trading horizon Shanghai Suochen is expected to generate 2.07 times less return on investment than Guotai Junan. In addition to that, Shanghai Suochen is 1.95 times more volatile than Guotai Junan Securities. It trades about 0.04 of its total potential returns per unit of risk. Guotai Junan Securities is currently generating about 0.17 per unit of volatility. If you would invest  1,470  in Guotai Junan Securities on September 28, 2024 and sell it today you would earn a total of  425.00  from holding Guotai Junan Securities or generate 28.91% return on investment over 90 days.

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

Shanghai Suochen Information  vs.  Guotai Junan Securities

Shanghai Suochen Inf

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Suochen Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Suochen sustained solid returns over the last few months and may actually be approaching a breakup point.

Guotai Junan Securities

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Shanghai Suochen and Guotai Junan

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

The idea behind Shanghai Suochen Information and Guotai Junan Securities 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.