Correlation Between Gansu Jiu and State Grid

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

Diversification Opportunities for Gansu Jiu and State Grid

0.69

Correlation Coefficient

Gansu Jiu  State Grid

Poor diversification

The 3 months correlation between Gansu and State is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and State Grid go up and down completely randomly.

Pair Corralation between Gansu Jiu and State Grid

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the State Grid. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.46 times less risky than State Grid. The stock trades about -0.04 of its potential returns per unit of risk. The State Grid InformationCommunication is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,848  in State Grid InformationCommunication on December 2, 2024 and sell it today you would earn a total of  68.00  from holding State Grid InformationCommunication or generate 3.68% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  State Grid InformationCommunic

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.

State Grid Informati

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Grid InformationCommunication 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.

Pair Trading with Gansu Jiu and State Grid

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

The idea behind Gansu Jiu Steel and State Grid InformationCommunication 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.