Correlation Between Guangdong Electric and Jiangxi Lianchuang
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By analyzing existing cross correlation between Guangdong Electric Power and Jiangxi Lianchuang Opto electronic, you can compare the effects of market volatilities on Guangdong Electric and Jiangxi Lianchuang 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 Guangdong Electric with a short position of Jiangxi Lianchuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Electric and Jiangxi Lianchuang.
Diversification Opportunities for Guangdong Electric and Jiangxi Lianchuang
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Guangdong and Jiangxi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Electric Power and Jiangxi Lianchuang Opto electr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Lianchuang Opto and Guangdong Electric 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 Guangdong Electric Power are associated (or correlated) with Jiangxi Lianchuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Lianchuang Opto has no effect on the direction of Guangdong Electric i.e., Guangdong Electric and Jiangxi Lianchuang go up and down completely randomly.
Pair Corralation between Guangdong Electric and Jiangxi Lianchuang
Assuming the 90 days trading horizon Guangdong Electric Power is expected to under-perform the Jiangxi Lianchuang. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Electric Power is 6.01 times less risky than Jiangxi Lianchuang. The stock trades about -0.06 of its potential returns per unit of risk. The Jiangxi Lianchuang Opto electronic is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,412 in Jiangxi Lianchuang Opto electronic on November 7, 2024 and sell it today you would earn a total of 421.00 from holding Jiangxi Lianchuang Opto electronic or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Electric Power vs. Jiangxi Lianchuang Opto electr
Performance |
| Timeline |
| Guangdong Electric Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Jiangxi Lianchuang Opto |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Guangdong Electric and Jiangxi Lianchuang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Electric and Jiangxi Lianchuang
The main advantage of trading using opposite Guangdong Electric and Jiangxi Lianchuang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Electric position performs unexpectedly, Jiangxi Lianchuang 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 Jiangxi Lianchuang will offset losses from the drop in Jiangxi Lianchuang's long position.The idea behind Guangdong Electric Power and Jiangxi Lianchuang Opto electronic 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.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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