Correlation Between Beijing SPC and Guocheng Mining

Can any of the company-specific risk be diversified away by investing in both Beijing SPC and Guocheng Mining 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 Beijing SPC and Guocheng Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing SPC Environment and Guocheng Mining Co, you can compare the effects of market volatilities on Beijing SPC and Guocheng Mining 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 Beijing SPC with a short position of Guocheng Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing SPC and Guocheng Mining.

Diversification Opportunities for Beijing SPC and Guocheng Mining

0.79

Correlation Coefficient

Beijing SPC  Guocheng Mining

Poor diversification

The 3 months correlation between Beijing and Guocheng is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Beijing SPC Environment and Guocheng Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guocheng Mining and Beijing SPC 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 Beijing SPC Environment are associated (or correlated) with Guocheng Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guocheng Mining has no effect on the direction of Beijing SPC i.e., Beijing SPC and Guocheng Mining go up and down completely randomly.

Pair Corralation between Beijing SPC and Guocheng Mining

Assuming the 90 days trading horizon Beijing SPC Environment is expected to generate 0.56 times more return on investment than Guocheng Mining. However, Beijing SPC Environment is 1.79 times less risky than Guocheng Mining. It trades about -0.13 of its potential returns per unit of risk. Guocheng Mining Co is currently generating about -0.08 per unit of risk. If you would invest  439.00  in Beijing SPC Environment on November 30, 2024 and sell it today you would lose (56.00) from holding Beijing SPC Environment or give up 12.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Beijing SPC Environment  vs.  Guocheng Mining Co

Beijing SPC Environment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing SPC Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Guocheng Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guocheng Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Beijing SPC and Guocheng Mining

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

The idea behind Beijing SPC Environment and Guocheng Mining Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.