Correlation Between De Rucci and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both De Rucci and Gansu Jiu 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 De Rucci and Gansu Jiu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between De Rucci Healthy and Gansu Jiu Steel, you can compare the effects of market volatilities on De Rucci and Gansu Jiu 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 De Rucci with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Rucci and Gansu Jiu.

Diversification Opportunities for De Rucci and Gansu Jiu

0.85

Correlation Coefficient

De Rucci  Gansu Jiu

Very poor diversification

The 3 months correlation between 001323 and Gansu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding De Rucci Healthy and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and De Rucci 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 De Rucci Healthy are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of De Rucci i.e., De Rucci and Gansu Jiu go up and down completely randomly.

Pair Corralation between De Rucci and Gansu Jiu

Assuming the 90 days trading horizon De Rucci Healthy is expected to generate 0.64 times more return on investment than Gansu Jiu. However, De Rucci Healthy is 1.56 times less risky than Gansu Jiu. It trades about 0.1 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.05 per unit of risk. If you would invest  3,283  in De Rucci Healthy on September 28, 2024 and sell it today you would earn a total of  449.00  from holding De Rucci Healthy or generate 13.68% return on investment over 90 days.

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

De Rucci Healthy  vs.  Gansu Jiu Steel

De Rucci Healthy

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Rucci Healthy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, De Rucci sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Jiu Steel

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with De Rucci and Gansu Jiu

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

The idea behind De Rucci Healthy and Gansu Jiu 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.