Correlation Between Gansu Jiu and Chengdu Spaceon

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

Diversification Opportunities for Gansu Jiu and Chengdu Spaceon

0.84

Correlation Coefficient

Gansu Jiu  Chengdu Spaceon

Very poor diversification

The 3 months correlation between Gansu and Chengdu is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec 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 Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Gansu Jiu and Chengdu Spaceon

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Chengdu Spaceon. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.04 times less risky than Chengdu Spaceon. The stock trades about -0.11 of its potential returns per unit of risk. The Chengdu Spaceon Electronics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,595  in Chengdu Spaceon Electronics on December 2, 2024 and sell it today you would lose (91.00) from holding Chengdu Spaceon Electronics or give up 5.71% 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.  Chengdu Spaceon Electronics

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 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.

Chengdu Spaceon Elec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chengdu Spaceon Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chengdu Spaceon 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 Chengdu Spaceon

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

The idea behind Gansu Jiu Steel and Chengdu Spaceon Electronics 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.