Correlation Between HeBei Jinniu and GRIPM Advanced

Can any of the company-specific risk be diversified away by investing in both HeBei Jinniu and GRIPM Advanced 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 HeBei Jinniu and GRIPM Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HeBei Jinniu Chemical and GRIPM Advanced Materials, you can compare the effects of market volatilities on HeBei Jinniu and GRIPM Advanced 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 HeBei Jinniu with a short position of GRIPM Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and GRIPM Advanced.

Diversification Opportunities for HeBei Jinniu and GRIPM Advanced

0.8

Correlation Coefficient

HeBei Jinniu  GRIPM Advanced

Very poor diversification

The 3 months correlation between HeBei and GRIPM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical and GRIPM Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIPM Advanced Materials and HeBei Jinniu 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 HeBei Jinniu Chemical are associated (or correlated) with GRIPM Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIPM Advanced Materials has no effect on the direction of HeBei Jinniu i.e., HeBei Jinniu and GRIPM Advanced go up and down completely randomly.

Pair Corralation between HeBei Jinniu and GRIPM Advanced

Assuming the 90 days trading horizon HeBei Jinniu Chemical is expected to generate 0.96 times more return on investment than GRIPM Advanced. However, HeBei Jinniu Chemical is 1.04 times less risky than GRIPM Advanced. It trades about 0.22 of its potential returns per unit of risk. GRIPM Advanced Materials is currently generating about 0.14 per unit of risk. If you would invest  361.00  in HeBei Jinniu Chemical on September 18, 2024 and sell it today you would earn a total of  199.00  from holding HeBei Jinniu Chemical or generate 55.12% return on investment over 90 days.

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

HeBei Jinniu Chemical  vs.  GRIPM Advanced Materials

HeBei Jinniu Chemical

Risk-Adjusted Performance

17 of 100

Solid

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

GRIPM Advanced Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GRIPM Advanced Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRIPM Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeBei Jinniu and GRIPM Advanced

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

The idea behind HeBei Jinniu Chemical and GRIPM Advanced Materials 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.