Correlation Between Guangzhou Dongfang and Yantai Moon

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Can any of the company-specific risk be diversified away by investing in both Guangzhou Dongfang and Yantai Moon 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 Guangzhou Dongfang and Yantai Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangzhou Dongfang Hotel and Yantai Moon Co, you can compare the effects of market volatilities on Guangzhou Dongfang and Yantai Moon 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 Guangzhou Dongfang with a short position of Yantai Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Dongfang and Yantai Moon.

Diversification Opportunities for Guangzhou Dongfang and Yantai Moon

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Guangzhou and Yantai is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Dongfang Hotel and Yantai Moon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai Moon and Guangzhou Dongfang 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 Guangzhou Dongfang Hotel are associated (or correlated) with Yantai Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai Moon has no effect on the direction of Guangzhou Dongfang i.e., Guangzhou Dongfang and Yantai Moon go up and down completely randomly.

Pair Corralation between Guangzhou Dongfang and Yantai Moon

Assuming the 90 days trading horizon Guangzhou Dongfang Hotel is expected to generate 1.24 times more return on investment than Yantai Moon. However, Guangzhou Dongfang is 1.24 times more volatile than Yantai Moon Co. It trades about 0.02 of its potential returns per unit of risk. Yantai Moon Co is currently generating about -0.05 per unit of risk. If you would invest  1,032  in Guangzhou Dongfang Hotel on September 12, 2024 and sell it today you would lose (2.00) from holding Guangzhou Dongfang Hotel or give up 0.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Guangzhou Dongfang Hotel  vs.  Yantai Moon Co

 Performance 
       Timeline  
Guangzhou Dongfang Hotel 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Dongfang Hotel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Dongfang sustained solid returns over the last few months and may actually be approaching a breakup point.
Yantai Moon 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Yantai Moon Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai Moon sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Dongfang and Yantai Moon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangzhou Dongfang and Yantai Moon

The main advantage of trading using opposite Guangzhou Dongfang and Yantai Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Dongfang position performs unexpectedly, Yantai Moon 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 Yantai Moon will offset losses from the drop in Yantai Moon's long position.
The idea behind Guangzhou Dongfang Hotel and Yantai Moon 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.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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