Correlation Between Baoshan Iron and Sichuan Qiaoyuan

Can any of the company-specific risk be diversified away by investing in both Baoshan Iron and Sichuan Qiaoyuan 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 Sichuan Qiaoyuan 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 Sichuan Qiaoyuan Gas, you can compare the effects of market volatilities on Baoshan Iron and Sichuan Qiaoyuan 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 Sichuan Qiaoyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baoshan Iron and Sichuan Qiaoyuan.

Diversification Opportunities for Baoshan Iron and Sichuan Qiaoyuan

-0.61

Correlation Coefficient

Baoshan Iron  Sichuan Qiaoyuan

Excellent diversification

The 3 months correlation between Baoshan and Sichuan is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Sichuan Qiaoyuan Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Qiaoyuan Gas 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 Sichuan Qiaoyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Qiaoyuan Gas has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Sichuan Qiaoyuan go up and down completely randomly.

Pair Corralation between Baoshan Iron and Sichuan Qiaoyuan

Assuming the 90 days trading horizon Baoshan Iron Steel is expected to generate 0.64 times more return on investment than Sichuan Qiaoyuan. However, Baoshan Iron Steel is 1.57 times less risky than Sichuan Qiaoyuan. It trades about 0.09 of its potential returns per unit of risk. Sichuan Qiaoyuan Gas is currently generating about -0.13 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	Weak
Accuracy	100.0%
Values	Daily Returns

Baoshan Iron Steel  vs.  Sichuan Qiaoyuan Gas

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.

Sichuan Qiaoyuan Gas

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Baoshan Iron and Sichuan Qiaoyuan

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

The idea behind Baoshan Iron Steel and Sichuan Qiaoyuan Gas 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.