Correlation Between China Vanke and Guocheng Mining

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

By analyzing existing cross correlation between China Vanke Co and Guocheng Mining Co, you can compare the effects of market volatilities on China Vanke and Guocheng Mining 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 China Vanke with a short position of Guocheng Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Vanke and Guocheng Mining.

Diversification Opportunities for China Vanke and Guocheng Mining

0.39

Correlation Coefficient

China Vanke  Guocheng Mining

Weak diversification

The 3 months correlation between China and Guocheng is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and Guocheng Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guocheng Mining and China Vanke 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 China Vanke Co are associated (or correlated) with Guocheng Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guocheng Mining has no effect on the direction of China Vanke i.e., China Vanke and Guocheng Mining go up and down completely randomly.

Pair Corralation between China Vanke and Guocheng Mining

Assuming the 90 days trading horizon China Vanke Co is expected to under-perform the Guocheng Mining. But the stock apears to be less risky and, when comparing its historical volatility, China Vanke Co is 2.71 times less risky than Guocheng Mining. The stock trades about -0.2 of its potential returns per unit of risk. The Guocheng Mining Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,395  in Guocheng Mining Co on September 24, 2024 and sell it today you would earn a total of  12.00  from holding Guocheng Mining Co or generate 0.86% return on investment over 90 days.

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

China Vanke Co  vs.  Guocheng Mining Co

China Vanke

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Vanke Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Vanke may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guocheng Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Vanke and Guocheng Mining

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

The idea behind China Vanke Co and Guocheng Mining Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.