Correlation Between NEW MILLENNIUM and ANGANG STEEL

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

By analyzing existing cross correlation between NEW MILLENNIUM IRON and ANGANG STEEL H , you can compare the effects of market volatilities on NEW MILLENNIUM and ANGANG STEEL 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 NEW MILLENNIUM with a short position of ANGANG STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and ANGANG STEEL.

Diversification Opportunities for NEW MILLENNIUM and ANGANG STEEL

-0.54

Correlation Coefficient

NEW MILLENNIUM  ANGANG STEEL

Excellent diversification

The 3 months correlation between NEW and ANGANG is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and ANGANG STEEL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGANG STEEL H and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with ANGANG STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGANG STEEL H has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and ANGANG STEEL go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and ANGANG STEEL

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the ANGANG STEEL. But the stock apears to be less risky and, when comparing its historical volatility, NEW MILLENNIUM IRON is 1.65 times less risky than ANGANG STEEL. The stock trades about -0.08 of its potential returns per unit of risk. The ANGANG STEEL H is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19.00  in ANGANG STEEL H on December 11, 2024 and sell it today you would earn a total of  5.00  from holding ANGANG STEEL H or generate 26.32% return on investment over 90 days.

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

NEW MILLENNIUM IRON  vs.  ANGANG STEEL H

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ANGANG STEEL H

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANGANG STEEL H are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ANGANG STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and ANGANG STEEL

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

The idea behind NEW MILLENNIUM IRON and ANGANG STEEL H 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.