Correlation Between Industrial and Bengang Steel

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

By analyzing existing cross correlation between Industrial and Commercial and Bengang Steel Plates, you can compare the effects of market volatilities on Industrial and Bengang 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 Industrial with a short position of Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Bengang Steel.

Diversification Opportunities for Industrial and Bengang Steel

0.61

Correlation Coefficient

Industrial  Bengang Steel

Poor diversification

The 3 months correlation between Industrial and Bengang is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and Industrial 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 Industrial and Commercial are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Industrial i.e., Industrial and Bengang Steel go up and down completely randomly.

Pair Corralation between Industrial and Bengang Steel

Assuming the 90 days trading horizon Industrial is expected to generate 1.35 times less return on investment than Bengang Steel. But when comparing it to its historical volatility, Industrial and Commercial is 2.37 times less risky than Bengang Steel. It trades about 0.13 of its potential returns per unit of risk. Bengang Steel Plates is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  287.00  in Bengang Steel Plates on September 25, 2024 and sell it today you would earn a total of  35.00  from holding Bengang Steel Plates or generate 12.2% return on investment over 90 days.

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

Industrial and Commercial  vs.  Bengang Steel Plates

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bengang Steel Plates

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Industrial and Bengang Steel

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

The idea behind Industrial and Commercial and Bengang Steel Plates 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.