Correlation Between Guocheng Mining and Yantai North

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

Diversification Opportunities for Guocheng Mining and Yantai North

0.56

Correlation Coefficient

Guocheng Mining  Yantai North

Very weak diversification

The 3 months correlation between Guocheng and Yantai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Yantai North Andre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai North Andre 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 Yantai North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai North Andre has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Yantai North go up and down completely randomly.

Pair Corralation between Guocheng Mining and Yantai North

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.08 times more return on investment than Yantai North. However, Guocheng Mining is 1.08 times more volatile than Yantai North Andre. It trades about -0.01 of its potential returns per unit of risk. Yantai North Andre is currently generating about -0.08 per unit of risk. If you would invest  1,336  in Guocheng Mining Co on October 9, 2024 and sell it today you would lose (197.00) from holding Guocheng Mining Co or give up 14.75% 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.  Yantai North Andre

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.

Yantai North Andre

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yantai North may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guocheng Mining and Yantai North

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

The idea behind Guocheng Mining Co and Yantai North Andre 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.