Correlation Between XinJiang GuoTong and Bengang Steel

Can any of the company-specific risk be diversified away by investing in both XinJiang GuoTong and Bengang Steel 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 XinJiang GuoTong and Bengang Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XinJiang GuoTong Pipeline and Bengang Steel Plates, you can compare the effects of market volatilities on XinJiang GuoTong and Bengang Steel 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 XinJiang GuoTong with a short position of Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of XinJiang GuoTong and Bengang Steel.

Diversification Opportunities for XinJiang GuoTong and Bengang Steel

0.92

Correlation Coefficient

XinJiang GuoTong  Bengang Steel

Almost no diversification

The 3 months correlation between XinJiang and Bengang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding XinJiang GuoTong Pipeline and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and XinJiang GuoTong 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 XinJiang GuoTong Pipeline are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of XinJiang GuoTong i.e., XinJiang GuoTong and Bengang Steel go up and down completely randomly.

Pair Corralation between XinJiang GuoTong and Bengang Steel

Assuming the 90 days trading horizon XinJiang GuoTong is expected to generate 1.58 times less return on investment than Bengang Steel. In addition to that, XinJiang GuoTong is 1.23 times more volatile than Bengang Steel Plates. It trades about 0.0 of its total potential returns per unit of risk. Bengang Steel Plates is currently generating about 0.01 per unit of volatility. If you would invest  383.00  in Bengang Steel Plates on September 13, 2024 and sell it today you would lose (16.00) from holding Bengang Steel Plates or give up 4.18% of portfolio value over 90 days.

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

XinJiang GuoTong Pipeline  vs.  Bengang Steel Plates

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XinJiang GuoTong Pipeline are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XinJiang GuoTong sustained solid returns over the last few months and may actually be approaching a breakup point.

Bengang Steel Plates

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XinJiang GuoTong and Bengang Steel

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

The idea behind XinJiang GuoTong Pipeline and Bengang Steel Plates 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.