Correlation Between Gansu Jiu and State Grid

Can any of the company-specific risk be diversified away by investing in both Gansu Jiu and State Grid 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 State Grid 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 State Grid InformationCommunication, you can compare the effects of market volatilities on Gansu Jiu and State Grid 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 State Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Jiu and State Grid.

Diversification Opportunities for Gansu Jiu and State Grid

0.88

Correlation Coefficient

Gansu Jiu  State Grid

Very poor diversification

The 3 months correlation between Gansu and State is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and State Grid go up and down completely randomly.

Pair Corralation between Gansu Jiu and State Grid

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 1.17 times more return on investment than State Grid. However, Gansu Jiu is 1.17 times more volatile than State Grid InformationCommunication. It trades about 0.21 of its potential returns per unit of risk. State Grid InformationCommunication is currently generating about 0.14 per unit of risk. If you would invest  124.00  in Gansu Jiu Steel on September 13, 2024 and sell it today you would earn a total of  69.00  from holding Gansu Jiu Steel or generate 55.65% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  State Grid InformationCommunic

Gansu Jiu Steel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 16 (%) 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.

State Grid Informati

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Grid InformationCommunication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, State Grid sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Jiu and State Grid

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

The idea behind Gansu Jiu Steel and State Grid InformationCommunication 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.