Correlation Between Gansu Jiu and Cultural Investment

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

Diversification Opportunities for Gansu Jiu and Cultural Investment

0.68

Correlation Coefficient

Gansu Jiu  Cultural Investment

Poor diversification

The 3 months correlation between Gansu and Cultural is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment 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 Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Cultural Investment go up and down completely randomly.

Pair Corralation between Gansu Jiu and Cultural Investment

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Cultural Investment. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.65 times less risky than Cultural Investment. The stock trades about -0.18 of its potential returns per unit of risk. The Cultural Investment Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Cultural Investment Holdings on October 5, 2024 and sell it today you would lose (4.00) from holding Cultural Investment Holdings or give up 1.8% of portfolio value over 90 days.

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

Gansu Jiu Steel  vs.  Cultural Investment Holdings

Gansu Jiu Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Cultural Investment

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Gansu Jiu and Cultural Investment

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

The idea behind Gansu Jiu Steel and Cultural Investment Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.