Correlation Between Shenzhen Silver and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both Shenzhen Silver 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 Silver 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 Silver Basis and Gansu Jiu Steel, you can compare the effects of market volatilities on Shenzhen Silver 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 Silver with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Silver and Gansu Jiu.

Diversification Opportunities for Shenzhen Silver and Gansu Jiu

0.51

Correlation Coefficient

Shenzhen Silver  Gansu Jiu

Very weak diversification

The 3 months correlation between Shenzhen and Gansu is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Silver Basis 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 Silver 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 Silver Basis 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 Silver i.e., Shenzhen Silver and Gansu Jiu go up and down completely randomly.

Pair Corralation between Shenzhen Silver and Gansu Jiu

Assuming the 90 days trading horizon Shenzhen Silver Basis is expected to under-perform the Gansu Jiu. In addition to that, Shenzhen Silver is 1.02 times more volatile than Gansu Jiu Steel. It trades about -0.7 of its total potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.49 per unit of volatility. If you would invest  186.00  in Gansu Jiu Steel on October 8, 2024 and sell it today you would lose (36.00) from holding Gansu Jiu Steel or give up 19.35% of portfolio value over 90 days.

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

Shenzhen Silver Basis  vs.  Gansu Jiu Steel

Shenzhen Silver Basis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Silver Basis 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gansu Jiu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Silver and Gansu Jiu

The main advantage of trading using opposite Shenzhen Silver and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Silver 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 Silver Basis 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.