Correlation Between Liaoning Chengda and Guangdong Silvere

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

By analyzing existing cross correlation between Liaoning Chengda Biotechnology and Guangdong Silvere Sci, you can compare the effects of market volatilities on Liaoning Chengda and Guangdong Silvere 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 Liaoning Chengda with a short position of Guangdong Silvere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liaoning Chengda and Guangdong Silvere.

Diversification Opportunities for Liaoning Chengda and Guangdong Silvere

0.78

Correlation Coefficient

Liaoning Chengda  Guangdong Silvere

Poor diversification

The 3 months correlation between Liaoning and Guangdong is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Liaoning Chengda Biotechnology and Guangdong Silvere Sci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Silvere Sci and Liaoning Chengda 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 Liaoning Chengda Biotechnology are associated (or correlated) with Guangdong Silvere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Silvere Sci has no effect on the direction of Liaoning Chengda i.e., Liaoning Chengda and Guangdong Silvere go up and down completely randomly.

Pair Corralation between Liaoning Chengda and Guangdong Silvere

Assuming the 90 days trading horizon Liaoning Chengda Biotechnology is expected to under-perform the Guangdong Silvere. But the stock apears to be less risky and, when comparing its historical volatility, Liaoning Chengda Biotechnology is 1.75 times less risky than Guangdong Silvere. The stock trades about -0.04 of its potential returns per unit of risk. The Guangdong Silvere Sci is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  635.00  in Guangdong Silvere Sci on September 29, 2024 and sell it today you would lose (22.00) from holding Guangdong Silvere Sci or give up 3.46% of portfolio value over 90 days.

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

Liaoning Chengda Biotechnology  vs.  Guangdong Silvere Sci

Liaoning Chengda Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liaoning Chengda Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Liaoning Chengda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangdong Silvere Sci

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Silvere Sci has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Silvere is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liaoning Chengda and Guangdong Silvere

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

The idea behind Liaoning Chengda Biotechnology and Guangdong Silvere Sci 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.