Correlation Between Gansu Jiu and Hengdian Entertainment

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

Diversification Opportunities for Gansu Jiu and Hengdian Entertainment

0.62

Correlation Coefficient

Gansu Jiu  Hengdian Entertainment

Poor diversification

The 3 months correlation between Gansu and Hengdian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Hengdian Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengdian Entertainment 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 Hengdian Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengdian Entertainment has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Hengdian Entertainment go up and down completely randomly.

Pair Corralation between Gansu Jiu and Hengdian Entertainment

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Hengdian Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.36 times less risky than Hengdian Entertainment. The stock trades about -0.17 of its potential returns per unit of risk. The Hengdian Entertainment Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,539  in Hengdian Entertainment Co on October 4, 2024 and sell it today you would lose (116.00) from holding Hengdian Entertainment Co or give up 7.54% 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.  Hengdian Entertainment Co

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.

Hengdian Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Gansu Jiu and Hengdian Entertainment

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

The idea behind Gansu Jiu Steel and Hengdian Entertainment Co 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.