Correlation Between Guizhou Chanhen and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both Guizhou Chanhen and Zhengzhou Coal 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 Guizhou Chanhen and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guizhou Chanhen Chemical and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Guizhou Chanhen and Zhengzhou Coal 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 Guizhou Chanhen with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guizhou Chanhen and Zhengzhou Coal.

Diversification Opportunities for Guizhou Chanhen and Zhengzhou Coal

0.12

Correlation Coefficient

Guizhou Chanhen  Zhengzhou Coal

Average diversification

The 3 months correlation between Guizhou and Zhengzhou is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Guizhou Chanhen Chemical and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Guizhou Chanhen 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 Guizhou Chanhen Chemical are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Guizhou Chanhen i.e., Guizhou Chanhen and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Guizhou Chanhen and Zhengzhou Coal

Assuming the 90 days trading horizon Guizhou Chanhen Chemical is expected to generate 1.33 times more return on investment than Zhengzhou Coal. However, Guizhou Chanhen is 1.33 times more volatile than Zhengzhou Coal Mining. It trades about 0.05 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about -0.06 per unit of risk. If you would invest  1,801  in Guizhou Chanhen Chemical on October 14, 2024 and sell it today you would earn a total of  317.00  from holding Guizhou Chanhen Chemical or generate 17.6% return on investment over 90 days.

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

Guizhou Chanhen Chemical  vs.  Zhengzhou Coal Mining

Guizhou Chanhen Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guizhou Chanhen Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guizhou Chanhen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guizhou Chanhen and Zhengzhou Coal

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

The idea behind Guizhou Chanhen Chemical and Zhengzhou Coal Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.