Correlation Between Gansu Jiu and Tianshan Aluminum

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

Diversification Opportunities for Gansu Jiu and Tianshan Aluminum

-0.37

Correlation Coefficient

Gansu Jiu  Tianshan Aluminum

Very good diversification

The 3 months correlation between Gansu and Tianshan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Tianshan Aluminum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshan Aluminum 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 Tianshan Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshan Aluminum has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Tianshan Aluminum go up and down completely randomly.

Pair Corralation between Gansu Jiu and Tianshan Aluminum

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Tianshan Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.24 times less risky than Tianshan Aluminum. The stock trades about -0.03 of its potential returns per unit of risk. The Tianshan Aluminum Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  796.00  in Tianshan Aluminum Group on December 26, 2024 and sell it today you would earn a total of  91.00  from holding Tianshan Aluminum Group or generate 11.43% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  Tianshan Aluminum Group

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.

Tianshan Aluminum

Risk-Adjusted Performance

OK

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

Pair Trading with Gansu Jiu and Tianshan Aluminum

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

The idea behind Gansu Jiu Steel and Tianshan Aluminum Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.