Correlation Between Gansu Jiu and Changsha Jingjia

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

Diversification Opportunities for Gansu Jiu and Changsha Jingjia

0.37

Correlation Coefficient

Gansu Jiu  Changsha Jingjia

Weak diversification

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

Pair Corralation between Gansu Jiu and Changsha Jingjia

Assuming the 90 days trading horizon Gansu Jiu is expected to generate 5.18 times less return on investment than Changsha Jingjia. But when comparing it to its historical volatility, Gansu Jiu Steel is 1.66 times less risky than Changsha Jingjia. It trades about 0.02 of its potential returns per unit of risk. Changsha Jingjia Microelectronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,244  in Changsha Jingjia Microelectronics on October 9, 2024 and sell it today you would earn a total of  2,323  from holding Changsha Jingjia Microelectronics or generate 37.2% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  Changsha Jingjia Microelectron

Gansu Jiu Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Changsha Jingjia Mic

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Gansu Jiu Steel and Changsha Jingjia Microelectronics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..