Correlation Between Guangdong Banbao and Zhengzhou Coal

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

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

Diversification Opportunities for Guangdong Banbao and Zhengzhou Coal

-0.3

Correlation Coefficient

Guangdong Banbao  Zhengzhou Coal

Very good diversification

The 3 months correlation between Guangdong and Zhengzhou is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Banbao Toy and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Guangdong Banbao 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 Guangdong Banbao Toy are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Guangdong Banbao i.e., Guangdong Banbao and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Guangdong Banbao and Zhengzhou Coal

Assuming the 90 days trading horizon Guangdong Banbao Toy is expected to under-perform the Zhengzhou Coal. In addition to that, Guangdong Banbao is 1.93 times more volatile than Zhengzhou Coal Mining. It trades about -0.16 of its total potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.13 per unit of volatility. If you would invest  1,306  in Zhengzhou Coal Mining on December 27, 2024 and sell it today you would earn a total of  195.00  from holding Zhengzhou Coal Mining or generate 14.93% return on investment over 90 days.

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

Guangdong Banbao Toy  vs.  Zhengzhou Coal Mining

Guangdong Banbao Toy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Banbao Toy 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.

Zhengzhou Coal Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhengzhou Coal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Banbao and Zhengzhou Coal

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

The idea behind Guangdong Banbao Toy and Zhengzhou Coal Mining 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.