Correlation Between Shaanxi Construction and Guangzhou Automobile
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By analyzing existing cross correlation between Shaanxi Construction Machinery and Guangzhou Automobile Group, you can compare the effects of market volatilities on Shaanxi Construction and Guangzhou Automobile 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 Shaanxi Construction with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Guangzhou Automobile.
Diversification Opportunities for Shaanxi Construction and Guangzhou Automobile
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shaanxi and Guangzhou is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Shaanxi Construction 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 Shaanxi Construction Machinery are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Guangzhou Automobile go up and down completely randomly.
Pair Corralation between Shaanxi Construction and Guangzhou Automobile
Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to generate 1.42 times more return on investment than Guangzhou Automobile. However, Shaanxi Construction is 1.42 times more volatile than Guangzhou Automobile Group. It trades about 0.1 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.08 per unit of risk. If you would invest 243.00 in Shaanxi Construction Machinery on September 27, 2024 and sell it today you would earn a total of 97.00 from holding Shaanxi Construction Machinery or generate 39.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shaanxi Construction Machinery vs. Guangzhou Automobile Group
Performance |
| Timeline |
| Shaanxi Construction |
| Guangzhou Automobile |
Shaanxi Construction and Guangzhou Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shaanxi Construction and Guangzhou Automobile
The main advantage of trading using opposite Shaanxi Construction and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaanxi Construction position performs unexpectedly, Guangzhou Automobile 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 Guangzhou Automobile will offset losses from the drop in Guangzhou Automobile's long position.| Shaanxi Construction vs. Cambricon Technologies Corp | Shaanxi Construction vs. Loongson Technology Corp | Shaanxi Construction vs. Shenzhen Fortune Trend | Shaanxi Construction vs. Chongqing Road Bridge |
| Guangzhou Automobile vs. New China Life | Guangzhou Automobile vs. Ming Yang Smart | Guangzhou Automobile vs. 159681 | Guangzhou Automobile vs. 159005 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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