Correlation Between GiantStep and Hannong Chemicals

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

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

Diversification Opportunities for GiantStep and Hannong Chemicals

0.85

Correlation Coefficient

GiantStep  Hannong Chemicals

Very poor diversification

The 3 months correlation between GiantStep and Hannong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GiantStep Co and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals and GiantStep 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 GiantStep Co are associated (or correlated) with Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of GiantStep i.e., GiantStep and Hannong Chemicals go up and down completely randomly.

Pair Corralation between GiantStep and Hannong Chemicals

Assuming the 90 days trading horizon GiantStep Co is expected to generate 1.51 times more return on investment than Hannong Chemicals. However, GiantStep is 1.51 times more volatile than Hannong Chemicals. It trades about 0.17 of its potential returns per unit of risk. Hannong Chemicals is currently generating about 0.14 per unit of risk. If you would invest  589,000  in GiantStep Co on October 12, 2024 and sell it today you would earn a total of  72,000  from holding GiantStep Co or generate 12.22% return on investment over 90 days.

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

GiantStep Co  vs.  Hannong Chemicals

GiantStep

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals 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.

Pair Trading with GiantStep and Hannong Chemicals

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

The idea behind GiantStep Co and Hannong Chemicals 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.