Correlation Between Guangzhou Tinci and Guocheng Mining

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

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

Diversification Opportunities for Guangzhou Tinci and Guocheng Mining

0.67

Correlation Coefficient

Guangzhou Tinci  Guocheng Mining

Poor diversification

The 3 months correlation between Guangzhou and Guocheng is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Tinci Materials and Guocheng Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guocheng Mining and Guangzhou Tinci 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 Tinci Materials 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 Guangzhou Tinci i.e., Guangzhou Tinci and Guocheng Mining go up and down completely randomly.

Pair Corralation between Guangzhou Tinci and Guocheng Mining

Assuming the 90 days trading horizon Guangzhou Tinci Materials is expected to under-perform the Guocheng Mining. In addition to that, Guangzhou Tinci is 1.09 times more volatile than Guocheng Mining Co. It trades about -0.04 of its total potential returns per unit of risk. Guocheng Mining Co is currently generating about -0.02 per unit of volatility. If you would invest  1,770  in Guocheng Mining Co on October 3, 2024 and sell it today you would lose (581.00) from holding Guocheng Mining Co or give up 32.82% of portfolio value over 90 days.

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

Guangzhou Tinci Materials  vs.  Guocheng Mining Co

Guangzhou Tinci Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guocheng Mining

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Guocheng Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Tinci and Guocheng Mining

The main advantage of trading using opposite Guangzhou Tinci and Guocheng Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Tinci 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 Guangzhou Tinci Materials 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.