Correlation Between Hunan Investment and Sinosteel Luonai

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

By analyzing existing cross correlation between Hunan Investment Group and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Hunan Investment and Sinosteel Luonai 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 Hunan Investment with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Sinosteel Luonai.

Diversification Opportunities for Hunan Investment and Sinosteel Luonai

0.76

Correlation Coefficient

Hunan Investment  Sinosteel Luonai

Poor diversification

The 3 months correlation between Hunan and Sinosteel is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Hunan Investment i.e., Hunan Investment and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Hunan Investment and Sinosteel Luonai

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 1.26 times more return on investment than Sinosteel Luonai. However, Hunan Investment is 1.26 times more volatile than Sinosteel Luonai Materials. It trades about 0.07 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.05 per unit of risk. If you would invest  523.00  in Hunan Investment Group on December 28, 2024 and sell it today you would earn a total of  32.00  from holding Hunan Investment Group or generate 6.12% return on investment over 90 days.

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

Hunan Investment Group  vs.  Sinosteel Luonai Materials

Hunan Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sinosteel Luonai Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Luonai Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinosteel Luonai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hunan Investment and Sinosteel Luonai

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

The idea behind Hunan Investment Group and Sinosteel Luonai Materials 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.