Correlation Between Gordon Auto and China Man
Can any of the company-specific risk be diversified away by investing in both Gordon Auto and China Man 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 Gordon Auto and China Man into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gordon Auto Body and China Man Made Fiber, you can compare the effects of market volatilities on Gordon Auto and China Man 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 Gordon Auto with a short position of China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gordon Auto and China Man.
Diversification Opportunities for Gordon Auto and China Man
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Gordon and China is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gordon Auto Body and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and Gordon Auto 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 Gordon Auto Body are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of Gordon Auto i.e., Gordon Auto and China Man go up and down completely randomly.
Pair Corralation between Gordon Auto and China Man
Assuming the 90 days trading horizon Gordon Auto Body is expected to generate 2.42 times more return on investment than China Man. However, Gordon Auto is 2.42 times more volatile than China Man Made Fiber. It trades about 0.21 of its potential returns per unit of risk. China Man Made Fiber is currently generating about 0.23 per unit of risk. If you would invest 3,505 in Gordon Auto Body on September 3, 2024 and sell it today you would earn a total of 410.00 from holding Gordon Auto Body or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gordon Auto Body vs. China Man Made Fiber
Performance |
| Timeline |
| Gordon Auto Body |
| China Man Made |
Gordon Auto and China Man Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gordon Auto and China Man
The main advantage of trading using opposite Gordon Auto and China Man positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gordon Auto position performs unexpectedly, China Man 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 China Man will offset losses from the drop in China Man's long position.| Gordon Auto vs. Kaulin Mfg | Gordon Auto vs. Tex Ray Industrial Co | Gordon Auto vs. De Licacy Industrial | Gordon Auto vs. Kwong Fong Industries |
| China Man vs. Oriental Union Chemical | China Man vs. China Petrochemical Development | China Man vs. Taiwan Styrene Monomer | China Man vs. Grand Pacific Petrochemical |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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