Correlation Between Gansu Huangtai and Western Mining

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

By analyzing existing cross correlation between Gansu Huangtai Wine marketing and Western Mining Co, you can compare the effects of market volatilities on Gansu Huangtai and Western Mining 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 Gansu Huangtai with a short position of Western Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Western Mining.

Diversification Opportunities for Gansu Huangtai and Western Mining

-0.16

Correlation Coefficient

Gansu Huangtai  Western Mining

Good diversification

The 3 months correlation between Gansu and Western is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Mining and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Western Mining go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Western Mining

Assuming the 90 days trading horizon Gansu Huangtai is expected to generate 4.76 times less return on investment than Western Mining. In addition to that, Gansu Huangtai is 1.42 times more volatile than Western Mining Co. It trades about 0.01 of its total potential returns per unit of risk. Western Mining Co is currently generating about 0.06 per unit of volatility. If you would invest  975.00  in Western Mining Co on September 29, 2024 and sell it today you would earn a total of  648.00  from holding Western Mining Co or generate 66.46% return on investment over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Western Mining Co

Gansu Huangtai Wine

Risk-Adjusted Performance

3 of 100

Insignificant

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

Western Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gansu Huangtai and Western Mining

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

The idea behind Gansu Huangtai Wine marketing and Western Mining 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.