Correlation Between Gansu Jiu and Konfoong Materials

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

Diversification Opportunities for Gansu Jiu and Konfoong Materials

0.21

Correlation Coefficient

Gansu Jiu  Konfoong Materials

Modest diversification

The 3 months correlation between Gansu and Konfoong is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Konfoong Materials Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konfoong Materials 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 Konfoong Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konfoong Materials has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Konfoong Materials go up and down completely randomly.

Pair Corralation between Gansu Jiu and Konfoong Materials

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Konfoong Materials. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.43 times less risky than Konfoong Materials. The stock trades about -0.05 of its potential returns per unit of risk. The Konfoong Materials International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,300  in Konfoong Materials International on December 27, 2024 and sell it today you would lose (311.00) from holding Konfoong Materials International or give up 4.26% of portfolio value over 90 days.

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

Gansu Jiu Steel  vs.  Konfoong Materials Internation

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.

Konfoong Materials

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Gansu Jiu Steel and Konfoong Materials International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.