Correlation Between Ganfeng Lithium and Rayonier Advanced

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

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

Diversification Opportunities for Ganfeng Lithium and Rayonier Advanced

0.73

Correlation Coefficient

Ganfeng Lithium  Rayonier Advanced

Poor diversification

The 3 months correlation between Ganfeng and Rayonier is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ganfeng Lithium Co and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced and Ganfeng Lithium 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 Ganfeng Lithium Co are associated (or correlated) with Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Ganfeng Lithium i.e., Ganfeng Lithium and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Ganfeng Lithium and Rayonier Advanced

Assuming the 90 days trading horizon Ganfeng Lithium Co is expected to generate 1.98 times more return on investment than Rayonier Advanced. However, Ganfeng Lithium is 1.98 times more volatile than Rayonier Advanced Materials. It trades about -0.06 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.32 per unit of risk. If you would invest  292.00  in Ganfeng Lithium Co on September 12, 2024 and sell it today you would lose (21.00) from holding Ganfeng Lithium Co or give up 7.19% of portfolio value over 90 days.

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

Ganfeng Lithium Co  vs.  Rayonier Advanced Materials

Ganfeng Lithium

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ganfeng Lithium Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Ganfeng Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Rayonier Advanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rayonier Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ganfeng Lithium and Rayonier Advanced

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

The idea behind Ganfeng Lithium Co and Rayonier Advanced 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.