Correlation Between Guocheng Mining and Industrial Bank

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

Diversification Opportunities for Guocheng Mining and Industrial Bank

0.5

Correlation Coefficient

Guocheng Mining  Industrial Bank

Very weak diversification

The 3 months correlation between Guocheng and Industrial is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Industrial Bank go up and down completely randomly.

Pair Corralation between Guocheng Mining and Industrial Bank

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 2.04 times more return on investment than Industrial Bank. However, Guocheng Mining is 2.04 times more volatile than Industrial Bank Co. It trades about 0.07 of its potential returns per unit of risk. Industrial Bank Co is currently generating about 0.07 per unit of risk. If you would invest  992.00  in Guocheng Mining Co on September 20, 2024 and sell it today you would earn a total of  482.00  from holding Guocheng Mining Co or generate 48.59% return on investment over 90 days.

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

Guocheng Mining Co  vs.  Industrial Bank Co

Guocheng Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guocheng Mining and Industrial Bank

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

The idea behind Guocheng Mining Co and Industrial Bank Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.