Correlation Between Bengang Steel and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both Bengang Steel and Gansu Jiu 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 Bengang Steel and Gansu Jiu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bengang Steel Plates and Gansu Jiu Steel, you can compare the effects of market volatilities on Bengang Steel and Gansu Jiu 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 Bengang Steel with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and Gansu Jiu.

Diversification Opportunities for Bengang Steel and Gansu Jiu

0.86

Correlation Coefficient

Bengang Steel  Gansu Jiu

Very poor diversification

The 3 months correlation between Bengang and Gansu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bengang Steel Plates and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and Bengang Steel 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 Bengang Steel Plates are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Bengang Steel i.e., Bengang Steel and Gansu Jiu go up and down completely randomly.

Pair Corralation between Bengang Steel and Gansu Jiu

Assuming the 90 days trading horizon Bengang Steel is expected to generate 1.18 times less return on investment than Gansu Jiu. But when comparing it to its historical volatility, Bengang Steel Plates is 1.11 times less risky than Gansu Jiu. It trades about 0.2 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Gansu Jiu Steel on September 13, 2024 and sell it today you would earn a total of  69.00  from holding Gansu Jiu Steel or generate 55.65% return on investment over 90 days.

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

Bengang Steel Plates  vs.  Gansu Jiu Steel

Bengang Steel Plates

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Jiu Steel

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Bengang Steel and Gansu Jiu

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

The idea behind Bengang Steel Plates and Gansu Jiu Steel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.