Correlation Between Guocheng Mining and Shanxi Tond

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

Diversification Opportunities for Guocheng Mining and Shanxi Tond

0.83

Correlation Coefficient

Guocheng Mining  Shanxi Tond

Very poor diversification

The 3 months correlation between Guocheng and Shanxi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shanxi Tond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanxi Tond Chemical 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 Shanxi Tond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanxi Tond Chemical has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shanxi Tond go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shanxi Tond

Assuming the 90 days trading horizon Guocheng Mining Co is expected to under-perform the Shanxi Tond. In addition to that, Guocheng Mining is 1.59 times more volatile than Shanxi Tond Chemical. It trades about -0.22 of its total potential returns per unit of risk. Shanxi Tond Chemical is currently generating about -0.35 per unit of volatility. If you would invest  573.00  in Shanxi Tond Chemical on October 9, 2024 and sell it today you would lose (104.00) from holding Shanxi Tond Chemical or give up 18.15% of portfolio value over 90 days.

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

Guocheng Mining Co  vs.  Shanxi Tond Chemical

Guocheng Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guocheng Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Shanxi Tond Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanxi Tond Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guocheng Mining and Shanxi Tond

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

The idea behind Guocheng Mining Co and Shanxi Tond Chemical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.