Correlation Between Guangzhou Restaurants and Shaanxi Construction
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By analyzing existing cross correlation between Guangzhou Restaurants Group and Shaanxi Construction Machinery, you can compare the effects of market volatilities on Guangzhou Restaurants and Shaanxi Construction 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 Restaurants with a short position of Shaanxi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Restaurants and Shaanxi Construction.
Diversification Opportunities for Guangzhou Restaurants and Shaanxi Construction
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Guangzhou and Shaanxi is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Restaurants Group and Shaanxi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Construction and Guangzhou Restaurants 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 Restaurants Group are associated (or correlated) with Shaanxi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Construction has no effect on the direction of Guangzhou Restaurants i.e., Guangzhou Restaurants and Shaanxi Construction go up and down completely randomly.
Pair Corralation between Guangzhou Restaurants and Shaanxi Construction
Assuming the 90 days trading horizon Guangzhou Restaurants is expected to generate 1.28 times less return on investment than Shaanxi Construction. But when comparing it to its historical volatility, Guangzhou Restaurants Group is 1.97 times less risky than Shaanxi Construction. It trades about 0.12 of its potential returns per unit of risk. Shaanxi Construction Machinery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 331.00 in Shaanxi Construction Machinery on September 29, 2024 and sell it today you would earn a total of 19.00 from holding Shaanxi Construction Machinery or generate 5.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangzhou Restaurants Group vs. Shaanxi Construction Machinery
Performance |
| Timeline |
| Guangzhou Restaurants |
| Shaanxi Construction |
Guangzhou Restaurants and Shaanxi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Restaurants and Shaanxi Construction
The main advantage of trading using opposite Guangzhou Restaurants and Shaanxi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Restaurants position performs unexpectedly, Shaanxi Construction 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 Shaanxi Construction will offset losses from the drop in Shaanxi Construction's long position.The idea behind Guangzhou Restaurants Group and Shaanxi Construction Machinery 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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