Correlation Between Baoshan Iron and Yunnan Chihong

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

Diversification Opportunities for Baoshan Iron and Yunnan Chihong

0.83

Correlation Coefficient

Baoshan Iron  Yunnan Chihong

Very poor diversification

The 3 months correlation between Baoshan and Yunnan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Yunnan Chihong ZincGermanium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chihong ZincG 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 Yunnan Chihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chihong ZincG has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Yunnan Chihong go up and down completely randomly.

Pair Corralation between Baoshan Iron and Yunnan Chihong

Assuming the 90 days trading horizon Baoshan Iron Steel is expected to generate 1.01 times more return on investment than Yunnan Chihong. However, Baoshan Iron is 1.01 times more volatile than Yunnan Chihong ZincGermanium. It trades about 0.23 of its potential returns per unit of risk. Yunnan Chihong ZincGermanium is currently generating about -0.01 per unit of risk. If you would invest  656.00  in Baoshan Iron Steel on September 25, 2024 and sell it today you would earn a total of  46.00  from holding Baoshan Iron Steel or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Baoshan Iron Steel  vs.  Yunnan Chihong ZincGermanium

Baoshan Iron Steel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baoshan Iron Steel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Baoshan Iron sustained solid returns over the last few months and may actually be approaching a breakup point.

Yunnan Chihong ZincG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Chihong ZincGermanium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Chihong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baoshan Iron and Yunnan Chihong

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

The idea behind Baoshan Iron Steel and Yunnan Chihong ZincGermanium 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.