Correlation Between Guangzhou Automobile and Chongqing Changan
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By analyzing existing cross correlation between Guangzhou Automobile Group and Chongqing Changan Automobile, you can compare the effects of market volatilities on Guangzhou Automobile and Chongqing Changan 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 Guangzhou Automobile with a short position of Chongqing Changan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Chongqing Changan.
Diversification Opportunities for Guangzhou Automobile and Chongqing Changan
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Guangzhou and Chongqing is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Chongqing Changan Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Changan and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Chongqing Changan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Changan has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Chongqing Changan go up and down completely randomly.
Pair Corralation between Guangzhou Automobile and Chongqing Changan
Assuming the 90 days trading horizon Guangzhou Automobile Group is expected to under-perform the Chongqing Changan. In addition to that, Guangzhou Automobile is 1.54 times more volatile than Chongqing Changan Automobile. It trades about -0.16 of its total potential returns per unit of risk. Chongqing Changan Automobile is currently generating about -0.04 per unit of volatility. If you would invest 1,297 in Chongqing Changan Automobile on January 4, 2025 and sell it today you would lose (9.00) from holding Chongqing Changan Automobile or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangzhou Automobile Group vs. Chongqing Changan Automobile
Performance |
| Timeline |
| Guangzhou Automobile |
| Chongqing Changan |
Guangzhou Automobile and Chongqing Changan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Automobile and Chongqing Changan
The main advantage of trading using opposite Guangzhou Automobile and Chongqing Changan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Automobile position performs unexpectedly, Chongqing Changan 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 Chongqing Changan will offset losses from the drop in Chongqing Changan's long position.The idea behind Guangzhou Automobile Group and Chongqing Changan Automobile 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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