Correlation Between Guangdong Skychem and Zangge Holding

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

By analyzing existing cross correlation between Guangdong Skychem Technology and Zangge Holding Co, you can compare the effects of market volatilities on Guangdong Skychem and Zangge Holding 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 Skychem with a short position of Zangge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Skychem and Zangge Holding.

Diversification Opportunities for Guangdong Skychem and Zangge Holding

0.75

Correlation Coefficient

Guangdong Skychem  Zangge Holding

Poor diversification

The 3 months correlation between Guangdong and Zangge is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Skychem Technology and Zangge Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zangge Holding and Guangdong Skychem 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 Skychem Technology are associated (or correlated) with Zangge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zangge Holding has no effect on the direction of Guangdong Skychem i.e., Guangdong Skychem and Zangge Holding go up and down completely randomly.

Pair Corralation between Guangdong Skychem and Zangge Holding

Assuming the 90 days trading horizon Guangdong Skychem Technology is expected to generate 2.08 times more return on investment than Zangge Holding. However, Guangdong Skychem is 2.08 times more volatile than Zangge Holding Co. It trades about 0.28 of its potential returns per unit of risk. Zangge Holding Co is currently generating about 0.1 per unit of risk. If you would invest  5,856  in Guangdong Skychem Technology on September 23, 2024 and sell it today you would earn a total of  6,966  from holding Guangdong Skychem Technology or generate 118.95% return on investment over 90 days.

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

Guangdong Skychem Technology  vs.  Zangge Holding Co

Guangdong Skychem

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Skychem Technology are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Skychem sustained solid returns over the last few months and may actually be approaching a breakup point.

Zangge Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zangge Holding Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zangge Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Skychem and Zangge Holding

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

The idea behind Guangdong Skychem Technology and Zangge Holding Co 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.