Correlation Between China Man and Gordon Auto
Can any of the company-specific risk be diversified away by investing in both China Man and Gordon Auto 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 China Man and Gordon Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Man Made Fiber and Gordon Auto Body, you can compare the effects of market volatilities on China Man and Gordon Auto 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 China Man with a short position of Gordon Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Man and Gordon Auto.
Diversification Opportunities for China Man and Gordon Auto
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Gordon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Man Made Fiber and Gordon Auto Body in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gordon Auto Body and China Man 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 China Man Made Fiber are associated (or correlated) with Gordon Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gordon Auto Body has no effect on the direction of China Man i.e., China Man and Gordon Auto go up and down completely randomly.
Pair Corralation between China Man and Gordon Auto
Assuming the 90 days trading horizon China Man is expected to generate 2.19 times less return on investment than Gordon Auto. But when comparing it to its historical volatility, China Man Made Fiber is 2.42 times less risky than Gordon Auto. It trades about 0.23 of its potential returns per unit of risk. Gordon Auto Body is currently generating about 0.21 of returns per unit of risk over similar time horizon. 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 |
China Man Made Fiber vs. Gordon Auto Body
Performance |
| Timeline |
| China Man Made |
| Gordon Auto Body |
China Man and Gordon Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Man and Gordon Auto
The main advantage of trading using opposite China Man and Gordon Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Man position performs unexpectedly, Gordon Auto 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 Gordon Auto will offset losses from the drop in Gordon Auto's long position.| China Man vs. Oriental Union Chemical | China Man vs. China Petrochemical Development | China Man vs. Taiwan Styrene Monomer | China Man vs. Grand Pacific Petrochemical |
| Gordon Auto vs. Kaulin Mfg | Gordon Auto vs. Tex Ray Industrial Co | Gordon Auto vs. De Licacy Industrial | Gordon Auto vs. Kwong Fong Industries |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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