Correlation Between CHINA HUARONG and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Goldman Sachs 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 CHINA HUARONG and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and The Goldman Sachs, you can compare the effects of market volatilities on CHINA HUARONG and Goldman Sachs 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 CHINA HUARONG with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Goldman Sachs.

Diversification Opportunities for CHINA HUARONG and Goldman Sachs

0.17

Correlation Coefficient

CHINA HUARONG  Goldman Sachs

Average diversification

The 3 months correlation between CHINA and Goldman is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Goldman Sachs go up and down completely randomly.

Pair Corralation between CHINA HUARONG and Goldman Sachs

Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 12.28 times more return on investment than Goldman Sachs. However, CHINA HUARONG is 12.28 times more volatile than The Goldman Sachs. It trades about 0.14 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.19 per unit of risk. If you would invest  0.05  in CHINA HUARONG ENERHD 50 on September 16, 2024 and sell it today you would earn a total of  0.10  from holding CHINA HUARONG ENERHD 50 or generate 200.0% return on investment over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  The Goldman Sachs

CHINA HUARONG ENERHD

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA HUARONG and Goldman Sachs

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

The idea behind CHINA HUARONG ENERHD 50 and The Goldman Sachs 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.