Correlation Between Gansu Jiu and Qiaoyin Environmental

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

Diversification Opportunities for Gansu Jiu and Qiaoyin Environmental

0.11

Correlation Coefficient

Gansu Jiu  Qiaoyin Environmental

Average diversification

The 3 months correlation between Gansu and Qiaoyin is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental 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 Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Gansu Jiu and Qiaoyin Environmental

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Qiaoyin Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.59 times less risky than Qiaoyin Environmental. The stock trades about -0.03 of its potential returns per unit of risk. The Qiaoyin Environmental Tech is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,037  in Qiaoyin Environmental Tech on December 25, 2024 and sell it today you would earn a total of  216.00  from holding Qiaoyin Environmental Tech or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Gansu Jiu Steel  vs.  Qiaoyin Environmental Tech

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.

Qiaoyin Environmental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qiaoyin Environmental Tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiaoyin Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Jiu and Qiaoyin Environmental

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

The idea behind Gansu Jiu Steel and Qiaoyin Environmental Tech 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.