Correlation Between China Molybdenum and Gansu Jiu

Can any of the company-specific risk be diversified away by investing in both China Molybdenum 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 Molybdenum 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 Molybdenum Co and Gansu Jiu Steel, you can compare the effects of market volatilities on China Molybdenum 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 Molybdenum with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Molybdenum and Gansu Jiu.

Diversification Opportunities for China Molybdenum and Gansu Jiu

-0.27

Correlation Coefficient

China Molybdenum  Gansu Jiu

Very good diversification

The 3 months correlation between China and Gansu is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co 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 Molybdenum 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 Molybdenum Co 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 Molybdenum i.e., China Molybdenum and Gansu Jiu go up and down completely randomly.

Pair Corralation between China Molybdenum and Gansu Jiu

Assuming the 90 days trading horizon China Molybdenum Co is expected to generate 0.7 times more return on investment than Gansu Jiu. However, China Molybdenum Co is 1.43 times less risky than Gansu Jiu. It trades about -0.29 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  742.00  in China Molybdenum Co on October 7, 2024 and sell it today you would lose (65.00) from holding China Molybdenum Co or give up 8.76% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Gansu Jiu Steel

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co 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.

Gansu Jiu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gansu Jiu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gansu Jiu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Molybdenum and Gansu Jiu

The main advantage of trading using opposite China Molybdenum and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Molybdenum 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 Molybdenum Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.