Correlation Between Baoshan Iron and Huaxia Fund

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

Diversification Opportunities for Baoshan Iron and Huaxia Fund

0.02

Correlation Coefficient

Baoshan Iron  Huaxia Fund

Significant diversification

The 3 months correlation between Baoshan and Huaxia is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Huaxia Fund go up and down completely randomly.

Pair Corralation between Baoshan Iron and Huaxia Fund

Assuming the 90 days trading horizon Baoshan Iron is expected to generate 1.21 times less return on investment than Huaxia Fund. In addition to that, Baoshan Iron is 1.34 times more volatile than Huaxia Fund Management. It trades about 0.09 of its total potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.14 per unit of volatility. If you would invest  283.00  in Huaxia Fund Management on December 26, 2024 and sell it today you would earn a total of  28.00  from holding Huaxia Fund Management or generate 9.89% return on investment over 90 days.

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

Baoshan Iron Steel  vs.  Huaxia Fund Management

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.

Huaxia Fund Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Baoshan Iron and Huaxia Fund

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

The idea behind Baoshan Iron Steel and Huaxia Fund Management 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.