Correlation Between Metallurgical and Guangdong Provincial

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

By analyzing existing cross correlation between Metallurgical of and Guangdong Provincial Expressway, you can compare the effects of market volatilities on Metallurgical and Guangdong Provincial 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 Metallurgical with a short position of Guangdong Provincial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metallurgical and Guangdong Provincial.

Diversification Opportunities for Metallurgical and Guangdong Provincial

-0.41

Correlation Coefficient

Metallurgical  Guangdong Provincial

Very good diversification

The 3 months correlation between Metallurgical and Guangdong is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Metallurgical of and Guangdong Provincial Expresswa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Provincial and Metallurgical 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 Metallurgical of are associated (or correlated) with Guangdong Provincial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Provincial has no effect on the direction of Metallurgical i.e., Metallurgical and Guangdong Provincial go up and down completely randomly.

Pair Corralation between Metallurgical and Guangdong Provincial

Assuming the 90 days trading horizon Metallurgical of is expected to under-perform the Guangdong Provincial. In addition to that, Metallurgical is 1.12 times more volatile than Guangdong Provincial Expressway. It trades about -0.09 of its total potential returns per unit of risk. Guangdong Provincial Expressway is currently generating about 0.23 per unit of volatility. If you would invest  1,067  in Guangdong Provincial Expressway on October 10, 2024 and sell it today you would earn a total of  290.00  from holding Guangdong Provincial Expressway or generate 27.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Metallurgical of  vs.  Guangdong Provincial Expresswa

Metallurgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metallurgical of 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.

Guangdong Provincial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Provincial Expressway are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Provincial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metallurgical and Guangdong Provincial

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

The idea behind Metallurgical of and Guangdong Provincial Expressway 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.