Correlation Between Gansu Jiu and Dazhong Transportation

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

Diversification Opportunities for Gansu Jiu and Dazhong Transportation

0.66

Correlation Coefficient

Gansu Jiu  Dazhong Transportation

Poor diversification

The 3 months correlation between Gansu and Dazhong is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Jiu Steel and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation 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 Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Gansu Jiu i.e., Gansu Jiu and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Gansu Jiu and Dazhong Transportation

Assuming the 90 days trading horizon Gansu Jiu Steel is expected to under-perform the Dazhong Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Gansu Jiu Steel is 1.04 times less risky than Dazhong Transportation. The stock trades about -0.49 of its potential returns per unit of risk. The Dazhong Transportation Group is currently generating about -0.36 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Dazhong Transportation Group on October 9, 2024 and sell it today you would lose (4.00) from holding Dazhong Transportation Group or give up 15.38% 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.  Dazhong Transportation Group

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.

Dazhong Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dazhong Transportation Group 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 Dazhong Transportation

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

The idea behind Gansu Jiu Steel and Dazhong Transportation Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.