Correlation Between Gansu Jiu and Shenzhen Kaifa

Can any of the company-specific risk be diversified away by investing in both Gansu Jiu and Shenzhen Kaifa 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 Gansu Jiu and Shenzhen Kaifa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gansu Jiu Steel and Shenzhen Kaifa Technology, you can compare the effects of market volatilities on Gansu Jiu and Shenzhen Kaifa 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 Gansu Jiu with a short position of Shenzhen Kaifa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Jiu and Shenzhen Kaifa.

Diversification Opportunities for Gansu Jiu and Shenzhen Kaifa

0.86

Correlation Coefficient

Gansu Jiu  Shenzhen Kaifa

Very poor diversification

The 3 months correlation between Gansu and Shenzhen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Shenzhen Kaifa Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kaifa Technology and Gansu Jiu 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 Gansu Jiu Steel are associated (or correlated) with Shenzhen Kaifa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kaifa Technology has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Shenzhen Kaifa go up and down completely randomly.

Pair Corralation between Gansu Jiu and Shenzhen Kaifa

Assuming the 90 days trading horizon Gansu Jiu is expected to generate 3.0 times less return on investment than Shenzhen Kaifa. But when comparing it to its historical volatility, Gansu Jiu Steel is 1.32 times less risky than Shenzhen Kaifa. It trades about 0.03 of its potential returns per unit of risk. Shenzhen Kaifa Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,283  in Shenzhen Kaifa Technology on October 7, 2024 and sell it today you would earn a total of  468.00  from holding Shenzhen Kaifa Technology or generate 36.48% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  Shenzhen Kaifa Technology

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gansu Jiu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gansu Jiu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Kaifa Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Kaifa Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Kaifa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gansu Jiu and Shenzhen Kaifa

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

The idea behind Gansu Jiu Steel and Shenzhen Kaifa Technology 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.