Correlation Between Grape King and China Steel

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

By analyzing existing cross correlation between Grape King Bio and China Steel Chemical, you can compare the effects of market volatilities on Grape King and China Steel 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 Grape King with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grape King and China Steel.

Diversification Opportunities for Grape King and China Steel

-0.32

Correlation Coefficient

Grape King  China Steel

Very good diversification

The 3 months correlation between Grape and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grape King Bio and China Steel Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Chemical and Grape King 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 Grape King Bio are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Chemical has no effect on the direction of Grape King i.e., Grape King and China Steel go up and down completely randomly.

Pair Corralation between Grape King and China Steel

Assuming the 90 days trading horizon Grape King Bio is expected to generate 1.04 times more return on investment than China Steel. However, Grape King is 1.04 times more volatile than China Steel Chemical. It trades about 0.18 of its potential returns per unit of risk. China Steel Chemical is currently generating about 0.02 per unit of risk. If you would invest  14,100  in Grape King Bio on September 4, 2024 and sell it today you would earn a total of  1,500  from holding Grape King Bio or generate 10.64% return on investment over 90 days.

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

Grape King Bio  vs.  China Steel Chemical

Grape King Bio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grape King Bio are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grape King may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Steel Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Steel Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Grape King and China Steel

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

The idea behind Grape King Bio and China Steel Chemical 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.