Correlation Between China Railway and Gansu Huangtai

Can any of the company-specific risk be diversified away by investing in both China Railway and Gansu Huangtai 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 China Railway and Gansu Huangtai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Railway Group and Gansu Huangtai Wine marketing, you can compare the effects of market volatilities on China Railway and Gansu Huangtai 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 China Railway with a short position of Gansu Huangtai. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Gansu Huangtai.

Diversification Opportunities for China Railway and Gansu Huangtai

0.5

Correlation Coefficient

China Railway  Gansu Huangtai

Very weak diversification

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

Pair Corralation between China Railway and Gansu Huangtai

Assuming the 90 days trading horizon China Railway Group is expected to generate 0.34 times more return on investment than Gansu Huangtai. However, China Railway Group is 2.97 times less risky than Gansu Huangtai. It trades about -0.17 of its potential returns per unit of risk. Gansu Huangtai Wine marketing is currently generating about -0.07 per unit of risk. If you would invest  652.00  in China Railway Group on December 29, 2024 and sell it today you would lose (70.00) from holding China Railway Group or give up 10.74% of portfolio value over 90 days.

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

China Railway Group  vs.  Gansu Huangtai Wine marketing

China Railway Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Group 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.

Gansu Huangtai Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Huangtai Wine marketing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Railway and Gansu Huangtai

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

The idea behind China Railway Group and Gansu Huangtai Wine marketing 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.