Correlation Between Guocheng Mining and Kuangda Technology

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

Diversification Opportunities for Guocheng Mining and Kuangda Technology

0.64

Correlation Coefficient

Guocheng Mining  Kuangda Technology

Poor diversification

The 3 months correlation between Guocheng and Kuangda is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology 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 Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Kuangda Technology go up and down completely randomly.

Pair Corralation between Guocheng Mining and Kuangda Technology

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.48 times more return on investment than Kuangda Technology. However, Guocheng Mining is 1.48 times more volatile than Kuangda Technology Group. It trades about -0.2 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about -0.37 per unit of risk. If you would invest  1,363  in Guocheng Mining Co on October 7, 2024 and sell it today you would lose (251.00) from holding Guocheng Mining Co or give up 18.42% of portfolio value over 90 days.

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

Guocheng Mining Co  vs.  Kuangda Technology Group

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 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.

Kuangda Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuangda Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kuangda Technology 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 Kuangda Technology

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

The idea behind Guocheng Mining Co and Kuangda Technology Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.