Correlation Between Guocheng Mining and Shanghai Phichem

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

Diversification Opportunities for Guocheng Mining and Shanghai Phichem

0.63

Correlation Coefficient

Guocheng Mining  Shanghai Phichem

Poor diversification

The 3 months correlation between Guocheng and Shanghai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shanghai Phichem Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Phichem Material 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 Shanghai Phichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Phichem Material has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shanghai Phichem go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shanghai Phichem

Assuming the 90 days trading horizon Guocheng Mining Co is expected to under-perform the Shanghai Phichem. But the stock apears to be less risky and, when comparing its historical volatility, Guocheng Mining Co is 1.11 times less risky than Shanghai Phichem. The stock trades about 0.0 of its potential returns per unit of risk. The Shanghai Phichem Material is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,547  in Shanghai Phichem Material on October 9, 2024 and sell it today you would lose (77.00) from holding Shanghai Phichem Material or give up 4.98% 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.  Shanghai Phichem Material

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.

Shanghai Phichem Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Guocheng Mining Co and Shanghai Phichem Material 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.