Correlation Between Great Wall and Reward Wool
Can any of the company-specific risk be diversified away by investing in both Great Wall and Reward Wool 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 Great Wall and Reward Wool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Reward Wool Industry, you can compare the effects of market volatilities on Great Wall and Reward Wool 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 Great Wall with a short position of Reward Wool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Reward Wool.
Diversification Opportunities for Great Wall and Reward Wool
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Reward is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Reward Wool Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reward Wool Industry and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Reward Wool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reward Wool Industry has no effect on the direction of Great Wall i.e., Great Wall and Reward Wool go up and down completely randomly.
Pair Corralation between Great Wall and Reward Wool
Assuming the 90 days trading horizon Great Wall is expected to generate 3.21 times less return on investment than Reward Wool. But when comparing it to its historical volatility, Great Wall Enterprise is 1.56 times less risky than Reward Wool. It trades about 0.04 of its potential returns per unit of risk. Reward Wool Industry is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,015 in Reward Wool Industry on August 30, 2024 and sell it today you would earn a total of 1,675 from holding Reward Wool Industry or generate 83.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Reward Wool Industry
Performance |
| Timeline |
| Great Wall Enterprise |
| Reward Wool Industry |
Great Wall and Reward Wool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Reward Wool
The main advantage of trading using opposite Great Wall and Reward Wool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Reward Wool 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 Reward Wool will offset losses from the drop in Reward Wool's long position.The idea behind Great Wall Enterprise and Reward Wool Industry 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.| Reward Wool vs. Yulon Finance Corp | Reward Wool vs. Taiwan Secom Co | Reward Wool vs. Great Wall Enterprise |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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