Correlation Between Baoshan Iron and Midea Group

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

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

Diversification Opportunities for Baoshan Iron and Midea Group

-0.14

Correlation Coefficient

Baoshan Iron  Midea Group

Good diversification

The 3 months correlation between Baoshan and Midea is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Midea Group Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midea Group and Baoshan Iron 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 Baoshan Iron Steel are associated (or correlated) with Midea Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midea Group has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Midea Group go up and down completely randomly.

Pair Corralation between Baoshan Iron and Midea Group

Assuming the 90 days trading horizon Baoshan Iron Steel is expected to generate 1.13 times more return on investment than Midea Group. However, Baoshan Iron is 1.13 times more volatile than Midea Group Co. It trades about 0.09 of its potential returns per unit of risk. Midea Group Co is currently generating about 0.02 per unit of risk. If you would invest  699.00  in Baoshan Iron Steel on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Baoshan Iron Steel or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Baoshan Iron Steel  vs.  Midea Group Co

Baoshan Iron Steel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baoshan Iron Steel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Baoshan Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Midea Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Midea Group Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Midea Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baoshan Iron and Midea Group

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

The idea behind Baoshan Iron Steel and Midea Group Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.