Correlation Between Guangzhou Zhujiang and Suzhou Mingzhi
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By analyzing existing cross correlation between Guangzhou Zhujiang Brewery and Suzhou Mingzhi Technology, you can compare the effects of market volatilities on Guangzhou Zhujiang and Suzhou Mingzhi 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 Zhujiang with a short position of Suzhou Mingzhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Zhujiang and Suzhou Mingzhi.
Diversification Opportunities for Guangzhou Zhujiang and Suzhou Mingzhi
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangzhou and Suzhou is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery and Suzhou Mingzhi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Mingzhi Technology and Guangzhou Zhujiang 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 Zhujiang Brewery are associated (or correlated) with Suzhou Mingzhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Mingzhi Technology has no effect on the direction of Guangzhou Zhujiang i.e., Guangzhou Zhujiang and Suzhou Mingzhi go up and down completely randomly.
Pair Corralation between Guangzhou Zhujiang and Suzhou Mingzhi
Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to generate 0.5 times more return on investment than Suzhou Mingzhi. However, Guangzhou Zhujiang Brewery is 2.01 times less risky than Suzhou Mingzhi. It trades about 0.04 of its potential returns per unit of risk. Suzhou Mingzhi Technology is currently generating about -0.01 per unit of risk. If you would invest 788.00 in Guangzhou Zhujiang Brewery on September 13, 2024 and sell it today you would earn a total of 191.00 from holding Guangzhou Zhujiang Brewery or generate 24.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangzhou Zhujiang Brewery vs. Suzhou Mingzhi Technology
Performance |
| Timeline |
| Guangzhou Zhujiang |
| Suzhou Mingzhi Technology |
Guangzhou Zhujiang and Suzhou Mingzhi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Zhujiang and Suzhou Mingzhi
The main advantage of trading using opposite Guangzhou Zhujiang and Suzhou Mingzhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Zhujiang position performs unexpectedly, Suzhou Mingzhi 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 Suzhou Mingzhi will offset losses from the drop in Suzhou Mingzhi's long position.The idea behind Guangzhou Zhujiang Brewery and Suzhou Mingzhi Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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