Correlation Between Gansu Jiu and Bohai Leasing

Can any of the company-specific risk be diversified away by investing in both Gansu Jiu and Bohai Leasing 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 Bohai Leasing 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 Bohai Leasing Co, you can compare the effects of market volatilities on Gansu Jiu and Bohai Leasing 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 Bohai Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Jiu and Bohai Leasing.

Diversification Opportunities for Gansu Jiu and Bohai Leasing

0.8

Correlation Coefficient

Gansu Jiu  Bohai Leasing

Very poor diversification

The 3 months correlation between Gansu and Bohai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Bohai Leasing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bohai Leasing 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 Bohai Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bohai Leasing has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Bohai Leasing go up and down completely randomly.

Pair Corralation between Gansu Jiu and Bohai Leasing

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 0.93 times more return on investment than Bohai Leasing. However, Gansu Jiu Steel is 1.07 times less risky than Bohai Leasing. It trades about -0.05 of its potential returns per unit of risk. Bohai Leasing Co is currently generating about -0.17 per unit of risk. If you would invest  160.00  in Gansu Jiu Steel on December 25, 2024 and sell it today you would lose (8.00) from holding Gansu Jiu Steel or give up 5.0% of portfolio value over 90 days.

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

Gansu Jiu Steel  vs.  Bohai Leasing Co

Gansu Jiu Steel

Risk-Adjusted Performance

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.

Bohai Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bohai Leasing Co 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 Gansu Jiu and Bohai Leasing

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

The idea behind Gansu Jiu Steel and Bohai Leasing 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..