Correlation Between Baoshan Iron and Fujian Green

Can any of the company-specific risk be diversified away by investing in both Baoshan Iron and Fujian Green 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 Baoshan Iron and Fujian Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baoshan Iron Steel and Fujian Green Pine, you can compare the effects of market volatilities on Baoshan Iron and Fujian Green 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 Baoshan Iron with a short position of Fujian Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baoshan Iron and Fujian Green.

Diversification Opportunities for Baoshan Iron and Fujian Green

0.72

Correlation Coefficient

Baoshan Iron  Fujian Green

Poor diversification

The 3 months correlation between Baoshan and Fujian is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Fujian Green Pine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Green Pine and Baoshan Iron 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 Baoshan Iron Steel are associated (or correlated) with Fujian Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Green Pine has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Fujian Green go up and down completely randomly.

Pair Corralation between Baoshan Iron and Fujian Green

Assuming the 90 days trading horizon Baoshan Iron is expected to generate 4.77 times less return on investment than Fujian Green. But when comparing it to its historical volatility, Baoshan Iron Steel is 1.44 times less risky than Fujian Green. It trades about 0.02 of its potential returns per unit of risk. Fujian Green Pine is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  465.00  in Fujian Green Pine on September 28, 2024 and sell it today you would earn a total of  52.00  from holding Fujian Green Pine or generate 11.18% return on investment over 90 days.

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

Baoshan Iron Steel  vs.  Fujian Green Pine

Baoshan Iron Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baoshan Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Baoshan Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fujian Green Pine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Green Pine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baoshan Iron and Fujian Green

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

The idea behind Baoshan Iron Steel and Fujian Green Pine 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.