Correlation Between Shenzhen MYS and Gansu Jiu

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

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

Diversification Opportunities for Shenzhen MYS and Gansu Jiu

0.38

Correlation Coefficient

Shenzhen MYS  Gansu Jiu

Weak diversification

The 3 months correlation between Shenzhen and Gansu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental 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 Shenzhen MYS 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 Shenzhen MYS Environmental 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 Shenzhen MYS i.e., Shenzhen MYS and Gansu Jiu go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Gansu Jiu

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to generate 0.95 times more return on investment than Gansu Jiu. However, Shenzhen MYS Environmental is 1.05 times less risky than Gansu Jiu. It trades about 0.05 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about 0.02 per unit of risk. If you would invest  321.00  in Shenzhen MYS Environmental on October 23, 2024 and sell it today you would earn a total of  26.00  from holding Shenzhen MYS Environmental or generate 8.1% return on investment over 90 days.

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

Shenzhen MYS Environmental  vs.  Gansu Jiu Steel

Shenzhen MYS Environ

Risk-Adjusted Performance

4 of 100

Insignificant

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

Gansu Jiu Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Shenzhen MYS and Gansu Jiu

The main advantage of trading using opposite Shenzhen MYS and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen MYS 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 Shenzhen MYS Environmental 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..