Correlation Between Sichuan Changhong and Guangdong Ellington
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By analyzing existing cross correlation between Sichuan Changhong Electric and Guangdong Ellington Electronics, you can compare the effects of market volatilities on Sichuan Changhong and Guangdong Ellington 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 Sichuan Changhong with a short position of Guangdong Ellington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Changhong and Guangdong Ellington.
Diversification Opportunities for Sichuan Changhong and Guangdong Ellington
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sichuan and Guangdong is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Changhong Electric and Guangdong Ellington Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Ellington and Sichuan Changhong 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 Sichuan Changhong Electric are associated (or correlated) with Guangdong Ellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Ellington has no effect on the direction of Sichuan Changhong i.e., Sichuan Changhong and Guangdong Ellington go up and down completely randomly.
Pair Corralation between Sichuan Changhong and Guangdong Ellington
Assuming the 90 days trading horizon Sichuan Changhong is expected to generate 2.8 times less return on investment than Guangdong Ellington. In addition to that, Sichuan Changhong is 1.05 times more volatile than Guangdong Ellington Electronics. It trades about 0.07 of its total potential returns per unit of risk. Guangdong Ellington Electronics is currently generating about 0.21 per unit of volatility. If you would invest 911.00 in Guangdong Ellington Electronics on November 8, 2024 and sell it today you would earn a total of 88.00 from holding Guangdong Ellington Electronics or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sichuan Changhong Electric vs. Guangdong Ellington Electronic
Performance |
| Timeline |
| Sichuan Changhong |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Guangdong Ellington |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Sichuan Changhong and Guangdong Ellington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sichuan Changhong and Guangdong Ellington
The main advantage of trading using opposite Sichuan Changhong and Guangdong Ellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Changhong position performs unexpectedly, Guangdong Ellington 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 Guangdong Ellington will offset losses from the drop in Guangdong Ellington's long position.The idea behind Sichuan Changhong Electric and Guangdong Ellington Electronics 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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