Correlation Between Guotai Junan and Anyang Iron

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

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

Diversification Opportunities for Guotai Junan and Anyang Iron

0.72

Correlation Coefficient

Guotai Junan  Anyang Iron

Poor diversification

The 3 months correlation between Guotai and Anyang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Junan Securities 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 Guotai Junan 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 Guotai Junan Securities 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 Guotai Junan i.e., Guotai Junan and Anyang Iron go up and down completely randomly.

Pair Corralation between Guotai Junan and Anyang Iron

Assuming the 90 days trading horizon Guotai Junan Securities is expected to under-perform the Anyang Iron. But the stock apears to be less risky and, when comparing its historical volatility, Guotai Junan Securities is 1.22 times less risky than Anyang Iron. The stock trades about -0.08 of its potential returns per unit of risk. The Anyang Iron Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  194.00  in Anyang Iron Steel on December 25, 2024 and sell it today you would earn a total of  2.00  from holding Anyang Iron Steel or generate 1.03% return on investment over 90 days.

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

Guotai Junan Securities  vs.  Anyang Iron Steel

Guotai Junan Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guotai Junan Securities 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.

Anyang Iron Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anyang Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anyang 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 Guotai Junan and Anyang Iron

The main advantage of trading using opposite Guotai Junan and Anyang Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guotai Junan 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 Guotai Junan Securities 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.