Correlation Between Guocheng Mining and China Reform

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

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

Diversification Opportunities for Guocheng Mining and China Reform

0.15

Correlation Coefficient

Guocheng Mining  China Reform

Average diversification

The 3 months correlation between Guocheng and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and China Reform Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reform Health and Guocheng Mining 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 Guocheng Mining Co are associated (or correlated) with China Reform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reform Health has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and China Reform go up and down completely randomly.

Pair Corralation between Guocheng Mining and China Reform

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 0.89 times more return on investment than China Reform. However, Guocheng Mining Co is 1.13 times less risky than China Reform. It trades about 0.04 of its potential returns per unit of risk. China Reform Health is currently generating about 0.01 per unit of risk. If you would invest  981.00  in Guocheng Mining Co on October 24, 2024 and sell it today you would earn a total of  218.00  from holding Guocheng Mining Co or generate 22.22% return on investment over 90 days.

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

Guocheng Mining Co  vs.  China Reform Health

Guocheng Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guocheng Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Reform Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Reform Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Guocheng Mining and China Reform

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

The idea behind Guocheng Mining Co and China Reform Health 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..