Correlation Between Changchun BCHT and Guangdong Liantai
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By analyzing existing cross correlation between Changchun BCHT Biotechnology and Guangdong Liantai Environmental, you can compare the effects of market volatilities on Changchun BCHT and Guangdong Liantai 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 Changchun BCHT with a short position of Guangdong Liantai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun BCHT and Guangdong Liantai.
Diversification Opportunities for Changchun BCHT and Guangdong Liantai
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Changchun and Guangdong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Guangdong Liantai Environmenta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Liantai and Changchun BCHT 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 Changchun BCHT Biotechnology are associated (or correlated) with Guangdong Liantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Liantai has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Guangdong Liantai go up and down completely randomly.
Pair Corralation between Changchun BCHT and Guangdong Liantai
Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to under-perform the Guangdong Liantai. In addition to that, Changchun BCHT is 1.31 times more volatile than Guangdong Liantai Environmental. It trades about -0.06 of its total potential returns per unit of risk. Guangdong Liantai Environmental is currently generating about -0.03 per unit of volatility. If you would invest 586.00 in Guangdong Liantai Environmental on November 9, 2024 and sell it today you would lose (185.00) from holding Guangdong Liantai Environmental or give up 31.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Changchun BCHT Biotechnology vs. Guangdong Liantai Environmenta
Performance |
| Timeline |
| Changchun BCHT Biote |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Guangdong Liantai |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Changchun BCHT and Guangdong Liantai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Changchun BCHT and Guangdong Liantai
The main advantage of trading using opposite Changchun BCHT and Guangdong Liantai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changchun BCHT position performs unexpectedly, Guangdong Liantai 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 Guangdong Liantai will offset losses from the drop in Guangdong Liantai's long position.The idea behind Changchun BCHT Biotechnology and Guangdong Liantai Environmental 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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