Correlation Between China Everbright and Gansu Jiu

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

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

Diversification Opportunities for China Everbright and Gansu Jiu

0.09

Correlation Coefficient

China Everbright  Gansu Jiu

Significant diversification

The 3 months correlation between China and Gansu is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and China Everbright 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 Everbright Bank are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of China Everbright i.e., China Everbright and Gansu Jiu go up and down completely randomly.

Pair Corralation between China Everbright and Gansu Jiu

Assuming the 90 days trading horizon China Everbright Bank is expected to generate 0.69 times more return on investment than Gansu Jiu. However, China Everbright Bank is 1.45 times less risky than Gansu Jiu. It trades about 0.0 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.44 per unit of risk. If you would invest  375.00  in China Everbright Bank on October 11, 2024 and sell it today you would lose (1.00) from holding China Everbright Bank or give up 0.27% of portfolio value over 90 days.

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

China Everbright Bank  vs.  Gansu Jiu Steel

China Everbright Bank

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Everbright may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gansu Jiu Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Everbright and Gansu Jiu

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

The idea behind China Everbright Bank and Gansu Jiu 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.