Correlation Between Guocheng Mining and Shenzhen New

Can any of the company-specific risk be diversified away by investing in both Guocheng Mining and Shenzhen New 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 Shenzhen New 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 Shenzhen New Nanshan, you can compare the effects of market volatilities on Guocheng Mining and Shenzhen New 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 Shenzhen New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guocheng Mining and Shenzhen New.

Diversification Opportunities for Guocheng Mining and Shenzhen New

0.68

Correlation Coefficient

Guocheng Mining  Shenzhen New

Poor diversification

The 3 months correlation between Guocheng and Shenzhen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shenzhen New Nanshan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen New Nanshan 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 Shenzhen New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen New Nanshan has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shenzhen New go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shenzhen New

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.17 times more return on investment than Shenzhen New. However, Guocheng Mining is 1.17 times more volatile than Shenzhen New Nanshan. It trades about -0.01 of its potential returns per unit of risk. Shenzhen New Nanshan is currently generating about -0.02 per unit of risk. If you would invest  1,667  in Guocheng Mining Co on October 24, 2024 and sell it today you would lose (472.00) from holding Guocheng Mining Co or give up 28.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.75%
Values	Daily Returns

Guocheng Mining Co  vs.  Shenzhen New Nanshan

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.

Shenzhen New Nanshan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guocheng Mining and Shenzhen New

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

The idea behind Guocheng Mining Co and Shenzhen New Nanshan 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.