Correlation Between Guocheng Mining and Anhui Liuguo

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

Diversification Opportunities for Guocheng Mining and Anhui Liuguo

0.58

Correlation Coefficient

Guocheng Mining  Anhui Liuguo

Very weak diversification

The 3 months correlation between Guocheng and Anhui is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Anhui Liuguo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Liuguo 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 Anhui Liuguo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Liuguo Chemical has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Anhui Liuguo go up and down completely randomly.

Pair Corralation between Guocheng Mining and Anhui Liuguo

Assuming the 90 days trading horizon Guocheng Mining Co is expected to under-perform the Anhui Liuguo. In addition to that, Guocheng Mining is 1.29 times more volatile than Anhui Liuguo Chemical. It trades about -0.2 of its total potential returns per unit of risk. Anhui Liuguo Chemical is currently generating about -0.01 per unit of volatility. If you would invest  553.00  in Anhui Liuguo Chemical on October 24, 2024 and sell it today you would lose (7.00) from holding Anhui Liuguo Chemical or give up 1.27% of portfolio value over 90 days.

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

Guocheng Mining Co  vs.  Anhui Liuguo Chemical

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.

Anhui Liuguo Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Liuguo Chemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Liuguo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guocheng Mining and Anhui Liuguo

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

The idea behind Guocheng Mining Co and Anhui Liuguo 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.