Correlation Between Guangzhou Dongfang and Hunan Tyen
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By analyzing existing cross correlation between Guangzhou Dongfang Hotel and Hunan Tyen Machinery, you can compare the effects of market volatilities on Guangzhou Dongfang and Hunan Tyen 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 Hunan Tyen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Dongfang and Hunan Tyen.
Diversification Opportunities for Guangzhou Dongfang and Hunan Tyen
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangzhou and Hunan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Dongfang Hotel and Hunan Tyen Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Tyen Machinery 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 Hunan Tyen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Tyen Machinery has no effect on the direction of Guangzhou Dongfang i.e., Guangzhou Dongfang and Hunan Tyen go up and down completely randomly.
Pair Corralation between Guangzhou Dongfang and Hunan Tyen
Assuming the 90 days trading horizon Guangzhou Dongfang Hotel is expected to under-perform the Hunan Tyen. But the stock apears to be less risky and, when comparing its historical volatility, Guangzhou Dongfang Hotel is 1.31 times less risky than Hunan Tyen. The stock trades about -0.22 of its potential returns per unit of risk. The Hunan Tyen Machinery is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 581.00 in Hunan Tyen Machinery on October 12, 2024 and sell it today you would lose (74.00) from holding Hunan Tyen Machinery or give up 12.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangzhou Dongfang Hotel vs. Hunan Tyen Machinery
Performance |
| Timeline |
| Guangzhou Dongfang Hotel |
| Hunan Tyen Machinery |
Guangzhou Dongfang and Hunan Tyen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Dongfang and Hunan Tyen
The main advantage of trading using opposite Guangzhou Dongfang and Hunan Tyen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Dongfang position performs unexpectedly, Hunan Tyen 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 Hunan Tyen will offset losses from the drop in Hunan Tyen's long position.The idea behind Guangzhou Dongfang Hotel and Hunan Tyen Machinery 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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