Correlation Between Guocheng Mining and Shanghai Action

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

Diversification Opportunities for Guocheng Mining and Shanghai Action

-0.28

Correlation Coefficient

Guocheng Mining  Shanghai Action

Very good diversification

The 3 months correlation between Guocheng and Shanghai is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shanghai Action Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Action Education 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 Action. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Action Education has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shanghai Action go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shanghai Action

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.18 times more return on investment than Shanghai Action. However, Guocheng Mining is 1.18 times more volatile than Shanghai Action Education. It trades about 0.03 of its potential returns per unit of risk. Shanghai Action Education is currently generating about 0.01 per unit of risk. If you would invest  1,029  in Guocheng Mining Co on October 7, 2024 and sell it today you would earn a total of  83.00  from holding Guocheng Mining Co or generate 8.07% return on investment over 90 days.

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

Guocheng Mining Co  vs.  Shanghai Action Education

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.

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Guocheng Mining and Shanghai Action

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

The idea behind Guocheng Mining Co and Shanghai Action Education 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.