Correlation Between Gansu Jiu and Guosheng Financial

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

Diversification Opportunities for Gansu Jiu and Guosheng Financial

0.41

Correlation Coefficient

Gansu Jiu  Guosheng Financial

Very weak diversification

The 3 months correlation between Gansu and Guosheng is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Guosheng Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guosheng Financial 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 Guosheng Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guosheng Financial has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Guosheng Financial go up and down completely randomly.

Pair Corralation between Gansu Jiu and Guosheng Financial

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Guosheng Financial. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 2.92 times less risky than Guosheng Financial. The stock trades about -0.49 of its potential returns per unit of risk. The Guosheng Financial Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,307  in Guosheng Financial Holding on October 9, 2024 and sell it today you would lose (24.00) from holding Guosheng Financial Holding or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Gansu Jiu Steel  vs.  Guosheng Financial Holding

Gansu Jiu Steel

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guosheng Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guosheng Financial Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guosheng Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gansu Jiu and Guosheng Financial

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

The idea behind Gansu Jiu Steel and Guosheng Financial Holding 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.