Correlation Between Hangzhou Gaoxin and Sinosteel Luonai

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

By analyzing existing cross correlation between Hangzhou Gaoxin Rubber and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Hangzhou Gaoxin and Sinosteel Luonai 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 Hangzhou Gaoxin with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Gaoxin and Sinosteel Luonai.

Diversification Opportunities for Hangzhou Gaoxin and Sinosteel Luonai

0.89

Correlation Coefficient

Hangzhou Gaoxin  Sinosteel Luonai

Very poor diversification

The 3 months correlation between Hangzhou and Sinosteel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Gaoxin Rubber and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Hangzhou Gaoxin 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 Hangzhou Gaoxin Rubber are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Hangzhou Gaoxin i.e., Hangzhou Gaoxin and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Hangzhou Gaoxin and Sinosteel Luonai

Assuming the 90 days trading horizon Hangzhou Gaoxin Rubber is expected to under-perform the Sinosteel Luonai. In addition to that, Hangzhou Gaoxin is 2.75 times more volatile than Sinosteel Luonai Materials. It trades about -0.31 of its total potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.54 per unit of volatility. If you would invest  443.00  in Sinosteel Luonai Materials on October 7, 2024 and sell it today you would lose (73.00) from holding Sinosteel Luonai Materials or give up 16.48% of portfolio value over 90 days.

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

Hangzhou Gaoxin Rubber  vs.  Sinosteel Luonai Materials

Hangzhou Gaoxin Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Gaoxin Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sinosteel Luonai Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinosteel Luonai Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hangzhou Gaoxin and Sinosteel Luonai

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

The idea behind Hangzhou Gaoxin Rubber and Sinosteel Luonai Materials 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.