Correlation Between Guocheng Mining and OBiO Technology

Can any of the company-specific risk be diversified away by investing in both Guocheng Mining and OBiO Technology 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 Guocheng Mining and OBiO Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guocheng Mining Co and OBiO Technology Corp, you can compare the effects of market volatilities on Guocheng Mining and OBiO Technology 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 Guocheng Mining with a short position of OBiO Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guocheng Mining and OBiO Technology.

Diversification Opportunities for Guocheng Mining and OBiO Technology

0.9

Correlation Coefficient

Guocheng Mining  OBiO Technology

Almost no diversification

The 3 months correlation between Guocheng and OBiO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and OBiO Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBiO Technology Corp and Guocheng Mining 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 Guocheng Mining Co are associated (or correlated) with OBiO Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBiO Technology Corp has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and OBiO Technology go up and down completely randomly.

Pair Corralation between Guocheng Mining and OBiO Technology

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 0.84 times more return on investment than OBiO Technology. However, Guocheng Mining Co is 1.19 times less risky than OBiO Technology. It trades about 0.17 of its potential returns per unit of risk. OBiO Technology Corp is currently generating about 0.14 per unit of risk. If you would invest  963.00  in Guocheng Mining Co on August 30, 2024 and sell it today you would earn a total of  383.00  from holding Guocheng Mining Co or generate 39.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Guocheng Mining Co  vs.  OBiO Technology Corp

Guocheng Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

OBiO Technology Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OBiO Technology Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, OBiO Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guocheng Mining and OBiO Technology

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

The idea behind Guocheng Mining Co and OBiO Technology Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.