Correlation Between Gulf Resources and Ever Glory

Can any of the company-specific risk be diversified away by investing in both Gulf Resources and Ever Glory at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gulf Resources and Ever Glory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gulf Resources and Ever Glory International Group, you can compare the effects of market volatilities on Gulf Resources and Ever Glory 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 Gulf Resources with a short position of Ever Glory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Resources and Ever Glory.

Diversification Opportunities for Gulf Resources and Ever Glory

-0.34

Correlation Coefficient

Gulf Resources  Ever Glory

Very good diversification

The 3 months correlation between Gulf and Ever is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Resources and Ever Glory International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ever Glory Internati and Gulf Resources 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 Gulf Resources are associated (or correlated) with Ever Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ever Glory Internati has no effect on the direction of Gulf Resources i.e., Gulf Resources and Ever Glory go up and down completely randomly.

Pair Corralation between Gulf Resources and Ever Glory

Given the investment horizon of 90 days Gulf Resources is expected to under-perform the Ever Glory. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Resources is 24.57 times less risky than Ever Glory. The stock trades about -0.05 of its potential returns per unit of risk. The Ever Glory International Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Ever Glory International Group on February 13, 2024 and sell it today you would lose (109.00) from holding Ever Glory International Group or give up 83.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.26%
Values	Daily Returns

Gulf Resources  vs.  Ever Glory International Group

Gulf Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gulf Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ever Glory Internati

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ever Glory International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Ever Glory is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gulf Resources and Ever Glory

The main advantage of trading using opposite Gulf Resources and Ever Glory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Resources position performs unexpectedly, Ever Glory 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 Ever Glory will offset losses from the drop in Ever Glory's long position.

The idea behind Gulf Resources and Ever Glory International Group 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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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.