Correlation Between Sinosteel Engineering and Anhui Fuhuang

Can any of the company-specific risk be diversified away by investing in both Sinosteel Engineering and Anhui Fuhuang 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 Sinosteel Engineering and Anhui Fuhuang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinosteel Engineering and and Anhui Fuhuang Steel, you can compare the effects of market volatilities on Sinosteel Engineering and Anhui Fuhuang 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 Sinosteel Engineering with a short position of Anhui Fuhuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Engineering and Anhui Fuhuang.

Diversification Opportunities for Sinosteel Engineering and Anhui Fuhuang

0.89

Correlation Coefficient

Sinosteel Engineering  Anhui Fuhuang

Very poor diversification

The 3 months correlation between Sinosteel and Anhui is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Engineering and and Anhui Fuhuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Fuhuang Steel and Sinosteel Engineering 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 Sinosteel Engineering and are associated (or correlated) with Anhui Fuhuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Fuhuang Steel has no effect on the direction of Sinosteel Engineering i.e., Sinosteel Engineering and Anhui Fuhuang go up and down completely randomly.

Pair Corralation between Sinosteel Engineering and Anhui Fuhuang

Assuming the 90 days trading horizon Sinosteel Engineering is expected to generate 2.28 times less return on investment than Anhui Fuhuang. But when comparing it to its historical volatility, Sinosteel Engineering and is 1.49 times less risky than Anhui Fuhuang. It trades about 0.2 of its potential returns per unit of risk. Anhui Fuhuang Steel is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  363.00  in Anhui Fuhuang Steel on September 4, 2024 and sell it today you would earn a total of  340.00  from holding Anhui Fuhuang Steel or generate 93.66% return on investment over 90 days.

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

Sinosteel Engineering and  vs.  Anhui Fuhuang Steel

Sinosteel Engineering and

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Engineering and are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Anhui Fuhuang Steel

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Fuhuang Steel are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Fuhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinosteel Engineering and Anhui Fuhuang

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

The idea behind Sinosteel Engineering and and Anhui Fuhuang Steel 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.