Correlation Between Bengang Steel and Hangzhou Guotai

Can any of the company-specific risk be diversified away by investing in both Bengang Steel and Hangzhou Guotai 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 Bengang Steel and Hangzhou Guotai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bengang Steel Plates and Hangzhou Guotai Environmental, you can compare the effects of market volatilities on Bengang Steel and Hangzhou Guotai 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 Bengang Steel with a short position of Hangzhou Guotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and Hangzhou Guotai.

Diversification Opportunities for Bengang Steel and Hangzhou Guotai

0.87

Correlation Coefficient

Bengang Steel  Hangzhou Guotai

Very poor diversification

The 3 months correlation between Bengang and Hangzhou is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bengang Steel Plates and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi and Bengang Steel 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 Bengang Steel Plates are associated (or correlated) with Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of Bengang Steel i.e., Bengang Steel and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between Bengang Steel and Hangzhou Guotai

Assuming the 90 days trading horizon Bengang Steel Plates is expected to under-perform the Hangzhou Guotai. In addition to that, Bengang Steel is 1.05 times more volatile than Hangzhou Guotai Environmental. It trades about 0.0 of its total potential returns per unit of risk. Hangzhou Guotai Environmental is currently generating about 0.06 per unit of volatility. If you would invest  2,713  in Hangzhou Guotai Environmental on September 27, 2024 and sell it today you would earn a total of  213.00  from holding Hangzhou Guotai Environmental or generate 7.85% return on investment over 90 days.

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

Bengang Steel Plates  vs.  Hangzhou Guotai Environmental

Bengang Steel Plates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bengang Steel Plates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bengang Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hangzhou Guotai Envi

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Guotai Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Guotai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bengang Steel and Hangzhou Guotai

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

The idea behind Bengang Steel Plates and Hangzhou Guotai 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.