Correlation Between Gansu Jiu and Sichuan Teway

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

Diversification Opportunities for Gansu Jiu and Sichuan Teway

0.91

Correlation Coefficient

Gansu Jiu  Sichuan Teway

Almost no diversification

The 3 months correlation between Gansu and Sichuan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food 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 Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Sichuan Teway go up and down completely randomly.

Pair Corralation between Gansu Jiu and Sichuan Teway

Assuming the 90 days trading horizon Gansu Jiu is expected to generate 1.13 times less return on investment than Sichuan Teway. In addition to that, Gansu Jiu is 1.21 times more volatile than Sichuan Teway Food. It trades about 0.16 of its total potential returns per unit of risk. Sichuan Teway Food is currently generating about 0.22 per unit of volatility. If you would invest  921.00  in Sichuan Teway Food on August 31, 2024 and sell it today you would earn a total of  440.00  from holding Sichuan Teway Food or generate 47.77% return on investment over 90 days.

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

Gansu Jiu Steel  vs.  Sichuan Teway Food

Gansu Jiu Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Teway Food

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Teway Food are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Teway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Jiu and Sichuan Teway

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

The idea behind Gansu Jiu Steel and Sichuan Teway Food 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.