Correlation Between China Minmetals and Hangzhou Guotai

Can any of the company-specific risk be diversified away by investing in both China Minmetals and Hangzhou Guotai 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 Hangzhou Guotai 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 Hangzhou Guotai Environmental, you can compare the effects of market volatilities on China Minmetals and Hangzhou Guotai 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 Hangzhou Guotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minmetals and Hangzhou Guotai.

Diversification Opportunities for China Minmetals and Hangzhou Guotai

0.12

Correlation Coefficient

China Minmetals  Hangzhou Guotai

Average diversification

The 3 months correlation between China and Hangzhou is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi 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 Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of China Minmetals i.e., China Minmetals and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between China Minmetals and Hangzhou Guotai

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the Hangzhou Guotai. But the stock apears to be less risky and, when comparing its historical volatility, China Minmetals Rare is 1.22 times less risky than Hangzhou Guotai. The stock trades about -0.29 of its potential returns per unit of risk. The Hangzhou Guotai Environmental is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,132  in Hangzhou Guotai Environmental on October 11, 2024 and sell it today you would earn a total of  14.00  from holding Hangzhou Guotai Environmental or generate 0.45% return on investment over 90 days.

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

China Minmetals Rare  vs.  Hangzhou Guotai Environmental

China Minmetals Rare

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Minmetals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hangzhou Guotai Envi

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Guotai Environmental are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Guotai may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Minmetals and Hangzhou Guotai

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

The idea behind China Minmetals Rare and Hangzhou Guotai Environmental 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.