Correlation Between China Minmetals and Guangzhou Haozhi

Can any of the company-specific risk be diversified away by investing in both China Minmetals and Guangzhou Haozhi 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 China Minmetals and Guangzhou Haozhi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Minmetals Rare and Guangzhou Haozhi Industrial, you can compare the effects of market volatilities on China Minmetals and Guangzhou Haozhi 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 China Minmetals with a short position of Guangzhou Haozhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minmetals and Guangzhou Haozhi.

Diversification Opportunities for China Minmetals and Guangzhou Haozhi

0.31

Correlation Coefficient

China Minmetals  Guangzhou Haozhi

Weak diversification

The 3 months correlation between China and Guangzhou is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Guangzhou Haozhi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Haozhi Ind and China Minmetals 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 China Minmetals Rare are associated (or correlated) with Guangzhou Haozhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Haozhi Ind has no effect on the direction of China Minmetals i.e., China Minmetals and Guangzhou Haozhi go up and down completely randomly.

Pair Corralation between China Minmetals and Guangzhou Haozhi

Assuming the 90 days trading horizon China Minmetals is expected to generate 5.54 times less return on investment than Guangzhou Haozhi. But when comparing it to its historical volatility, China Minmetals Rare is 1.58 times less risky than Guangzhou Haozhi. It trades about 0.02 of its potential returns per unit of risk. Guangzhou Haozhi Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,509  in Guangzhou Haozhi Industrial on October 10, 2024 and sell it today you would earn a total of  256.00  from holding Guangzhou Haozhi Industrial or generate 16.96% return on investment over 90 days.

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

China Minmetals Rare  vs.  Guangzhou Haozhi Industrial

China Minmetals Rare

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Minmetals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Haozhi Ind

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haozhi Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haozhi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Minmetals and Guangzhou Haozhi

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

The idea behind China Minmetals Rare and Guangzhou Haozhi Industrial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.