Correlation Between Guangzhou Haige and Sinosteel Luonai

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Can any of the company-specific risk be diversified away by investing in both Guangzhou Haige and Sinosteel Luonai 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 Guangzhou Haige and Sinosteel Luonai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangzhou Haige Communications and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Guangzhou Haige and Sinosteel Luonai 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 Guangzhou Haige with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Haige and Sinosteel Luonai.

Diversification Opportunities for Guangzhou Haige and Sinosteel Luonai

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Guangzhou and Sinosteel is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Guangzhou Haige 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 Guangzhou Haige Communications are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Sinosteel Luonai

Assuming the 90 days trading horizon Guangzhou Haige Communications is expected to generate 1.09 times more return on investment than Sinosteel Luonai. However, Guangzhou Haige is 1.09 times more volatile than Sinosteel Luonai Materials. It trades about 0.0 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.03 per unit of risk. If you would invest  1,172  in Guangzhou Haige Communications on October 5, 2024 and sell it today you would lose (155.00) from holding Guangzhou Haige Communications or give up 13.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Guangzhou Haige Communications  vs.  Sinosteel Luonai Materials

 Performance 
       Timeline  
Guangzhou Haige Comm 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guangzhou Haige Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou Haige is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Sinosteel Luonai Mat 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sinosteel Luonai Materials 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.

Guangzhou Haige and Sinosteel Luonai Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangzhou Haige and Sinosteel Luonai

The main advantage of trading using opposite Guangzhou Haige and Sinosteel Luonai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Haige position performs unexpectedly, Sinosteel Luonai 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 Sinosteel Luonai will offset losses from the drop in Sinosteel Luonai's long position.
The idea behind Guangzhou Haige Communications and Sinosteel Luonai Materials 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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