Correlation Between Gansu Jiu and City Development

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

Diversification Opportunities for Gansu Jiu and City Development

0.73

Correlation Coefficient

Gansu Jiu  City Development

Poor diversification

The 3 months correlation between Gansu and City is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and City Development Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Development Env 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 City Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Development Env has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and City Development go up and down completely randomly.

Pair Corralation between Gansu Jiu and City Development

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 1.73 times more return on investment than City Development. However, Gansu Jiu is 1.73 times more volatile than City Development Environment. It trades about 0.02 of its potential returns per unit of risk. City Development Environment is currently generating about 0.03 per unit of risk. If you would invest  147.00  in Gansu Jiu Steel on October 23, 2024 and sell it today you would earn a total of  2.00  from holding Gansu Jiu Steel or generate 1.36% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  City Development Environment

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.

City Development Env

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in City Development Environment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, City Development 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 City Development

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

The idea behind Gansu Jiu Steel and City Development Environment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.