Correlation Between Gansu Jiu and Anhui Transport

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

Diversification Opportunities for Gansu Jiu and Anhui Transport

0.67

Correlation Coefficient

Gansu Jiu  Anhui Transport

Poor diversification

The 3 months correlation between Gansu and Anhui is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Anhui Transport Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Transport Cons 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 Anhui Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Transport Cons has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Anhui Transport go up and down completely randomly.

Pair Corralation between Gansu Jiu and Anhui Transport

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Anhui Transport. In addition to that, Gansu Jiu is 1.22 times more volatile than Anhui Transport Consulting. It trades about -0.49 of its total potential returns per unit of risk. Anhui Transport Consulting is currently generating about -0.34 per unit of volatility. If you would invest  990.00  in Anhui Transport Consulting on October 9, 2024 and sell it today you would lose (115.00) from holding Anhui Transport Consulting or give up 11.62% 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.  Anhui Transport Consulting

Gansu Jiu Steel

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Anhui Transport Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Transport Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anhui Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gansu Jiu and Anhui Transport

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

The idea behind Gansu Jiu Steel and Anhui Transport Consulting 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.