Correlation Between Hang Xiao and Jiangxi Naipu

Can any of the company-specific risk be diversified away by investing in both Hang Xiao and Jiangxi Naipu 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 Hang Xiao and Jiangxi Naipu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hang Xiao Steel and Jiangxi Naipu Mining, you can compare the effects of market volatilities on Hang Xiao and Jiangxi Naipu 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 Hang Xiao with a short position of Jiangxi Naipu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Xiao and Jiangxi Naipu.

Diversification Opportunities for Hang Xiao and Jiangxi Naipu

0.91

Correlation Coefficient

Hang Xiao  Jiangxi Naipu

Almost no diversification

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

Pair Corralation between Hang Xiao and Jiangxi Naipu

Assuming the 90 days trading horizon Hang Xiao Steel is expected to generate 0.88 times more return on investment than Jiangxi Naipu. However, Hang Xiao Steel is 1.13 times less risky than Jiangxi Naipu. It trades about 0.21 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.16 per unit of risk. If you would invest  216.00  in Hang Xiao Steel on September 13, 2024 and sell it today you would earn a total of  86.00  from holding Hang Xiao Steel or generate 39.81% return on investment over 90 days.

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

Hang Xiao Steel  vs.  Jiangxi Naipu Mining

Hang Xiao Steel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Xiao Steel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hang Xiao sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Naipu Mining

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Hang Xiao and Jiangxi Naipu

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

The idea behind Hang Xiao Steel and Jiangxi Naipu Mining 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.