Correlation Between Gansu Jiu and China Shenhua

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

Diversification Opportunities for Gansu Jiu and China Shenhua

0.26

Correlation Coefficient

Gansu Jiu  China Shenhua

Modest diversification

The 3 months correlation between Gansu and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua Energy 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 China Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and China Shenhua go up and down completely randomly.

Pair Corralation between Gansu Jiu and China Shenhua

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to generate 2.36 times more return on investment than China Shenhua. However, Gansu Jiu is 2.36 times more volatile than China Shenhua Energy. It trades about 0.01 of its potential returns per unit of risk. China Shenhua Energy is currently generating about -0.07 per unit of risk. If you would invest  149.00  in Gansu Jiu Steel on October 24, 2024 and sell it today you would lose (2.00) from holding Gansu Jiu Steel or give up 1.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Gansu Jiu Steel  vs.  China Shenhua Energy

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

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.

China Shenhua Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Shenhua Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Gansu Jiu and China Shenhua

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

The idea behind Gansu Jiu Steel and China Shenhua Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.