Correlation Between Guangdong Liantai and Shandong Sanyuan
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By analyzing existing cross correlation between Guangdong Liantai Environmental and Shandong Sanyuan Biotechnology, you can compare the effects of market volatilities on Guangdong Liantai and Shandong Sanyuan 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 Liantai with a short position of Shandong Sanyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Shandong Sanyuan.
Diversification Opportunities for Guangdong Liantai and Shandong Sanyuan
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and Shandong is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Shandong Sanyuan Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sanyuan Bio and Guangdong Liantai 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 Liantai Environmental are associated (or correlated) with Shandong Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sanyuan Bio has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and Shandong Sanyuan go up and down completely randomly.
Pair Corralation between Guangdong Liantai and Shandong Sanyuan
Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to under-perform the Shandong Sanyuan. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Liantai Environmental is 1.02 times less risky than Shandong Sanyuan. The stock trades about -0.03 of its potential returns per unit of risk. The Shandong Sanyuan Biotechnology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,546 in Shandong Sanyuan Biotechnology on November 9, 2024 and sell it today you would lose (978.00) from holding Shandong Sanyuan Biotechnology or give up 27.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Liantai Environmenta vs. Shandong Sanyuan Biotechnology
Performance |
| Timeline |
| Guangdong Liantai |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Shandong Sanyuan Bio |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Guangdong Liantai and Shandong Sanyuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Liantai and Shandong Sanyuan
The main advantage of trading using opposite Guangdong Liantai and Shandong Sanyuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Liantai position performs unexpectedly, Shandong Sanyuan 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 Shandong Sanyuan will offset losses from the drop in Shandong Sanyuan's long position.The idea behind Guangdong Liantai Environmental and Shandong Sanyuan Biotechnology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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