Correlation Between Gansu Huangtai and Shanghai Yanpu

Can any of the company-specific risk be diversified away by investing in both Gansu Huangtai and Shanghai Yanpu 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 Shanghai Yanpu 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 Shanghai Yanpu Metal, you can compare the effects of market volatilities on Gansu Huangtai and Shanghai Yanpu 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 Shanghai Yanpu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Shanghai Yanpu.

Diversification Opportunities for Gansu Huangtai and Shanghai Yanpu

0.62

Correlation Coefficient

Gansu Huangtai  Shanghai Yanpu

Poor diversification

The 3 months correlation between Gansu and Shanghai is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Shanghai Yanpu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yanpu Metal 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 Shanghai Yanpu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yanpu Metal has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Shanghai Yanpu go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Shanghai Yanpu

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to generate 1.82 times more return on investment than Shanghai Yanpu. However, Gansu Huangtai is 1.82 times more volatile than Shanghai Yanpu Metal. It trades about 0.07 of its potential returns per unit of risk. Shanghai Yanpu Metal is currently generating about -0.04 per unit of risk. If you would invest  1,553  in Gansu Huangtai Wine marketing on October 11, 2024 and sell it today you would earn a total of  164.00  from holding Gansu Huangtai Wine marketing or generate 10.56% return on investment over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Shanghai Yanpu Metal

Gansu Huangtai Wine

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Yanpu Metal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yanpu Metal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Yanpu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gansu Huangtai and Shanghai Yanpu

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

The idea behind Gansu Huangtai Wine marketing and Shanghai Yanpu Metal 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.