Correlation Between Xinjiang Baodi and Anyang Iron

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

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

Diversification Opportunities for Xinjiang Baodi and Anyang Iron

0.5

Correlation Coefficient

Xinjiang Baodi  Anyang Iron

Very weak diversification

The 3 months correlation between Xinjiang and Anyang is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and Anyang Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anyang Iron Steel and Xinjiang Baodi 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 Xinjiang Baodi Mining are associated (or correlated) with Anyang Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anyang Iron Steel has no effect on the direction of Xinjiang Baodi i.e., Xinjiang Baodi and Anyang Iron go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and Anyang Iron

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to generate 1.15 times more return on investment than Anyang Iron. However, Xinjiang Baodi is 1.15 times more volatile than Anyang Iron Steel. It trades about 0.02 of its potential returns per unit of risk. Anyang Iron Steel is currently generating about -0.01 per unit of risk. If you would invest  604.00  in Xinjiang Baodi Mining on October 24, 2024 and sell it today you would earn a total of  16.00  from holding Xinjiang Baodi Mining or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.59%
Values	Daily Returns

Xinjiang Baodi Mining  vs.  Anyang Iron Steel

Xinjiang Baodi Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinjiang Baodi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anyang Iron Steel

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Xinjiang Baodi and Anyang Iron

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

The idea behind Xinjiang Baodi Mining and Anyang 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.