Correlation Between Gansu Jiu and Hengli Industrial

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

Diversification Opportunities for Gansu Jiu and Hengli Industrial

0.64

Correlation Coefficient

Gansu Jiu  Hengli Industrial

Poor diversification

The 3 months correlation between Gansu and Hengli is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial 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 Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Hengli Industrial go up and down completely randomly.

Pair Corralation between Gansu Jiu and Hengli Industrial

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 0.59 times more return on investment than Hengli Industrial. However, Gansu Jiu Steel is 1.7 times less risky than Hengli Industrial. It trades about 0.0 of its potential returns per unit of risk. Hengli Industrial Development is currently generating about -0.03 per unit of risk. If you would invest  165.00  in Gansu Jiu Steel on October 4, 2024 and sell it today you would lose (9.00) from holding Gansu Jiu Steel or give up 5.45% of portfolio value over 90 days.

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

Gansu Jiu Steel  vs.  Hengli Industrial Development

Gansu Jiu Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Hengli Industrial

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Gansu Jiu and Hengli Industrial

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

The idea behind Gansu Jiu Steel and Hengli Industrial Development 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..