Correlation Between Guangdong Liantai and Shaanxi Construction
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By analyzing existing cross correlation between Guangdong Liantai Environmental and Shaanxi Construction Machinery, you can compare the effects of market volatilities on Guangdong Liantai 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 Guangdong Liantai with a short position of Shaanxi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Shaanxi Construction.
Diversification Opportunities for Guangdong Liantai and Shaanxi Construction
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and Shaanxi is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Shaanxi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Construction 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 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 Guangdong Liantai i.e., Guangdong Liantai and Shaanxi Construction go up and down completely randomly.
Pair Corralation between Guangdong Liantai and Shaanxi Construction
Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to under-perform the Shaanxi Construction. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Liantai Environmental is 2.3 times less risky than Shaanxi Construction. The stock trades about -0.12 of its potential returns per unit of risk. The Shaanxi Construction Machinery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 331.00 in Shaanxi Construction Machinery on October 29, 2024 and sell it today you would lose (1.00) from holding Shaanxi Construction Machinery or give up 0.3% 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. Shaanxi Construction Machinery
Performance |
| Timeline |
| Guangdong Liantai |
| Shaanxi Construction |
Guangdong Liantai and Shaanxi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Liantai and Shaanxi Construction
The main advantage of trading using opposite Guangdong Liantai and Shaanxi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Liantai 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.| Guangdong Liantai vs. Jiangxi Lianchuang Opto electronic | Guangdong Liantai vs. Shenzhen Topway Video | Guangdong Liantai vs. Leyard Optoelectronic | Guangdong Liantai vs. Cicc Fund Management |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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