Correlation Between Industrial and Liuzhou Iron

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

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

Diversification Opportunities for Industrial and Liuzhou Iron

-0.66

Correlation Coefficient

Industrial  Liuzhou Iron

Excellent diversification

The 3 months correlation between Industrial and Liuzhou is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Liuzhou Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liuzhou Iron Steel and Industrial 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 Industrial and Commercial are associated (or correlated) with Liuzhou Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liuzhou Iron Steel has no effect on the direction of Industrial i.e., Industrial and Liuzhou Iron go up and down completely randomly.

Pair Corralation between Industrial and Liuzhou Iron

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.67 times more return on investment than Liuzhou Iron. However, Industrial and Commercial is 1.5 times less risky than Liuzhou Iron. It trades about 0.18 of its potential returns per unit of risk. Liuzhou Iron Steel is currently generating about -0.24 per unit of risk. If you would invest  615.00  in Industrial and Commercial on October 6, 2024 and sell it today you would earn a total of  56.00  from holding Industrial and Commercial or generate 9.11% return on investment over 90 days.

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

Industrial and Commercial  vs.  Liuzhou Iron Steel

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Liuzhou Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liuzhou Iron Steel 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Liuzhou Iron

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

The idea behind Industrial and Commercial and Liuzhou 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.