Correlation Between Guangzhou Seagull and Yunnan Xiyi

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

Diversification Opportunities for Guangzhou Seagull and Yunnan Xiyi

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Guangzhou and Yunnan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Seagull Kitchen and Yunnan Xiyi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Xiyi Industrial and Guangzhou Seagull 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 Seagull Kitchen are associated (or correlated) with Yunnan Xiyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Xiyi Industrial has no effect on the direction of Guangzhou Seagull i.e., Guangzhou Seagull and Yunnan Xiyi go up and down completely randomly.

Pair Corralation between Guangzhou Seagull and Yunnan Xiyi

Assuming the 90 days trading horizon Guangzhou Seagull Kitchen is expected to under-perform the Yunnan Xiyi. In addition to that, Guangzhou Seagull is 1.06 times more volatile than Yunnan Xiyi Industrial. It trades about 0.0 of its total potential returns per unit of risk. Yunnan Xiyi Industrial is currently generating about 0.04 per unit of volatility. If you would invest  1,126  in Yunnan Xiyi Industrial on September 4, 2024 and sell it today you would earn a total of  252.00  from holding Yunnan Xiyi Industrial or generate 22.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Guangzhou Seagull Kitchen  vs.  Yunnan Xiyi Industrial

 Performance 
       Timeline  
Guangzhou Seagull Kitchen 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Seagull Kitchen are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Seagull sustained solid returns over the last few months and may actually be approaching a breakup point.
Yunnan Xiyi Industrial 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Xiyi Industrial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Xiyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Seagull and Yunnan Xiyi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangzhou Seagull and Yunnan Xiyi

The main advantage of trading using opposite Guangzhou Seagull and Yunnan Xiyi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Seagull position performs unexpectedly, Yunnan Xiyi 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 Yunnan Xiyi will offset losses from the drop in Yunnan Xiyi's long position.
The idea behind Guangzhou Seagull Kitchen and Yunnan Xiyi Industrial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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