Correlation Between Changjiang Publishing and Baoshan Iron

Can any of the company-specific risk be diversified away by investing in both Changjiang Publishing and Baoshan Iron 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 Changjiang Publishing and Baoshan Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changjiang Publishing Media and Baoshan Iron Steel, you can compare the effects of market volatilities on Changjiang Publishing and Baoshan Iron 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 Changjiang Publishing with a short position of Baoshan Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changjiang Publishing and Baoshan Iron.

Diversification Opportunities for Changjiang Publishing and Baoshan Iron

0.74

Correlation Coefficient

Changjiang Publishing  Baoshan Iron

Poor diversification

The 3 months correlation between Changjiang and Baoshan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Publishing Media and Baoshan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baoshan Iron Steel and Changjiang Publishing 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 Changjiang Publishing Media are associated (or correlated) with Baoshan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baoshan Iron Steel has no effect on the direction of Changjiang Publishing i.e., Changjiang Publishing and Baoshan Iron go up and down completely randomly.

Pair Corralation between Changjiang Publishing and Baoshan Iron

Assuming the 90 days trading horizon Changjiang Publishing Media is expected to generate 1.1 times more return on investment than Baoshan Iron. However, Changjiang Publishing is 1.1 times more volatile than Baoshan Iron Steel. It trades about 0.04 of its potential returns per unit of risk. Baoshan Iron Steel is currently generating about -0.08 per unit of risk. If you would invest  897.00  in Changjiang Publishing Media on October 11, 2024 and sell it today you would earn a total of  11.00  from holding Changjiang Publishing Media or generate 1.23% return on investment over 90 days.

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

Changjiang Publishing Media  vs.  Baoshan Iron Steel

Changjiang Publishing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Publishing Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changjiang Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baoshan Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Changjiang Publishing and Baoshan Iron

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

The idea behind Changjiang Publishing Media and Baoshan Iron Steel 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.