Correlation Between Bengang Steel and Zhuzhou Kibing

Can any of the company-specific risk be diversified away by investing in both Bengang Steel and Zhuzhou Kibing 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 Zhuzhou Kibing 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 Zhuzhou Kibing Group, you can compare the effects of market volatilities on Bengang Steel and Zhuzhou Kibing 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 Zhuzhou Kibing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and Zhuzhou Kibing.

Diversification Opportunities for Bengang Steel and Zhuzhou Kibing

0.93

Correlation Coefficient

Bengang Steel  Zhuzhou Kibing

Almost no diversification

The 3 months correlation between Bengang and Zhuzhou is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bengang Steel Plates and Zhuzhou Kibing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhuzhou Kibing Group 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 Zhuzhou Kibing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhuzhou Kibing Group has no effect on the direction of Bengang Steel i.e., Bengang Steel and Zhuzhou Kibing go up and down completely randomly.

Pair Corralation between Bengang Steel and Zhuzhou Kibing

Assuming the 90 days trading horizon Bengang Steel Plates is expected to generate 1.07 times more return on investment than Zhuzhou Kibing. However, Bengang Steel is 1.07 times more volatile than Zhuzhou Kibing Group. It trades about 0.16 of its potential returns per unit of risk. Zhuzhou Kibing Group is currently generating about 0.13 per unit of risk. If you would invest  244.00  in Bengang Steel Plates on September 23, 2024 and sell it today you would earn a total of  91.00  from holding Bengang Steel Plates or generate 37.3% return on investment over 90 days.

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

Bengang Steel Plates  vs.  Zhuzhou Kibing Group

Bengang Steel Plates

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhuzhou Kibing Group

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Bengang Steel and Zhuzhou Kibing

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

The idea behind Bengang Steel Plates and Zhuzhou Kibing 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.