Correlation Between Gansu Jiu and HeNan Splendor

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

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

Diversification Opportunities for Gansu Jiu and HeNan Splendor

0.71

Correlation Coefficient

Gansu Jiu  HeNan Splendor

Poor diversification

The 3 months correlation between Gansu and HeNan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and HeNan Splendor Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeNan Splendor Science and Gansu Jiu 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 Gansu Jiu Steel are associated (or correlated) with HeNan Splendor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeNan Splendor Science has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and HeNan Splendor go up and down completely randomly.

Pair Corralation between Gansu Jiu and HeNan Splendor

Assuming the 90 days trading horizon Gansu Jiu is expected to generate 2.9 times less return on investment than HeNan Splendor. But when comparing it to its historical volatility, Gansu Jiu Steel is 1.55 times less risky than HeNan Splendor. It trades about 0.03 of its potential returns per unit of risk. HeNan Splendor Science is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  764.00  in HeNan Splendor Science on September 12, 2024 and sell it today you would earn a total of  359.00  from holding HeNan Splendor Science or generate 46.99% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  HeNan Splendor Science

Gansu Jiu Steel

Risk-Adjusted Performance

15 of 100

Good

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

HeNan Splendor Science

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeNan Splendor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Jiu and HeNan Splendor

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

The idea behind Gansu Jiu Steel and HeNan Splendor Science 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.