Correlation Between Guangzhou Dongfang and Hongrun Construction
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By analyzing existing cross correlation between Guangzhou Dongfang Hotel and Hongrun Construction Group, you can compare the effects of market volatilities on Guangzhou Dongfang and Hongrun Construction 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 Hongrun Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Dongfang and Hongrun Construction.
Diversification Opportunities for Guangzhou Dongfang and Hongrun Construction
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Guangzhou and Hongrun is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Dongfang Hotel and Hongrun Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongrun Construction 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 Hongrun Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongrun Construction has no effect on the direction of Guangzhou Dongfang i.e., Guangzhou Dongfang and Hongrun Construction go up and down completely randomly.
Pair Corralation between Guangzhou Dongfang and Hongrun Construction
Assuming the 90 days trading horizon Guangzhou Dongfang Hotel is expected to under-perform the Hongrun Construction. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Dongfang Hotel is 1.08 times less risky than Hongrun Construction. The stock trades about -0.22 of its potential returns per unit of risk. The Hongrun Construction Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 489.00 in Hongrun Construction Group on October 12, 2024 and sell it today you would earn a total of 35.00 from holding Hongrun Construction Group or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangzhou Dongfang Hotel vs. Hongrun Construction Group
Performance |
| Timeline |
| Guangzhou Dongfang Hotel |
| Hongrun Construction |
Guangzhou Dongfang and Hongrun Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Dongfang and Hongrun Construction
The main advantage of trading using opposite Guangzhou Dongfang and Hongrun Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Dongfang position performs unexpectedly, Hongrun Construction 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 Hongrun Construction will offset losses from the drop in Hongrun Construction's long position.The idea behind Guangzhou Dongfang Hotel and Hongrun Construction Group 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 Stocks Directory module to find actively traded stocks across global markets.
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