Correlation Between Guocheng Mining and Shuhua Sports

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

Diversification Opportunities for Guocheng Mining and Shuhua Sports

0.82

Correlation Coefficient

Guocheng Mining  Shuhua Sports

Very poor diversification

The 3 months correlation between Guocheng and Shuhua is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports 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 Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Shuhua Sports go up and down completely randomly.

Pair Corralation between Guocheng Mining and Shuhua Sports

Assuming the 90 days trading horizon Guocheng Mining Co is expected to under-perform the Shuhua Sports. In addition to that, Guocheng Mining is 1.35 times more volatile than Shuhua Sports Co. It trades about -0.04 of its total potential returns per unit of risk. Shuhua Sports Co is currently generating about 0.04 per unit of volatility. If you would invest  825.00  in Shuhua Sports Co on October 5, 2024 and sell it today you would earn a total of  43.00  from holding Shuhua Sports Co or generate 5.21% return on investment over 90 days.

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

Guocheng Mining Co  vs.  Shuhua Sports Co

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.

Shuhua Sports

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Guocheng Mining and Shuhua Sports

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

The idea behind Guocheng Mining Co and Shuhua Sports 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.