Correlation Between Gansu Jiu and DR

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

Diversification Opportunities for Gansu Jiu and DR

0.01

Correlation Coefficient

Gansu Jiu  DR

Significant diversification

The 3 months correlation between Gansu and DR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited 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 DR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and DR go up and down completely randomly.

Pair Corralation between Gansu Jiu and DR

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the DR. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.79 times less risky than DR. The stock trades about -0.28 of its potential returns per unit of risk. The DR Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,355  in DR Limited on October 24, 2024 and sell it today you would earn a total of  107.00  from holding DR Limited or generate 4.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Gansu Jiu Steel  vs.  DR Limited

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

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.

DR Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gansu Jiu and DR

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

The idea behind Gansu Jiu Steel and DR Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.