Correlation Between Focus Media and Gansu Jiu

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

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

Diversification Opportunities for Focus Media and Gansu Jiu

0.41

Correlation Coefficient

Focus Media  Gansu Jiu

Very weak diversification

The 3 months correlation between Focus and Gansu is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Focus Media Information 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 Focus Media 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 Focus Media Information 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 Focus Media i.e., Focus Media and Gansu Jiu go up and down completely randomly.

Pair Corralation between Focus Media and Gansu Jiu

Assuming the 90 days trading horizon Focus Media Information is expected to generate 0.81 times more return on investment than Gansu Jiu. However, Focus Media Information is 1.23 times less risky than Gansu Jiu. It trades about 0.04 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.03 per unit of risk. If you would invest  581.00  in Focus Media Information on October 7, 2024 and sell it today you would earn a total of  95.00  from holding Focus Media Information or generate 16.35% return on investment over 90 days.

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

Focus Media Information  vs.  Gansu Jiu Steel

Focus Media Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Media Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gansu Jiu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gansu Jiu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Focus Media and Gansu Jiu

The main advantage of trading using opposite Focus Media and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Media 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 Focus Media Information 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.