Correlation Between Sinosteel Luonai and China Galaxy

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

By analyzing existing cross correlation between Sinosteel Luonai Materials and China Galaxy Securities, you can compare the effects of market volatilities on Sinosteel Luonai and China Galaxy 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 Sinosteel Luonai with a short position of China Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Luonai and China Galaxy.

Diversification Opportunities for Sinosteel Luonai and China Galaxy

0.91

Correlation Coefficient

Sinosteel Luonai  China Galaxy

Almost no diversification

The 3 months correlation between Sinosteel and China is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Luonai Materials and China Galaxy Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Galaxy Securities and Sinosteel Luonai 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 Sinosteel Luonai Materials are associated (or correlated) with China Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Galaxy Securities has no effect on the direction of Sinosteel Luonai i.e., Sinosteel Luonai and China Galaxy go up and down completely randomly.

Pair Corralation between Sinosteel Luonai and China Galaxy

Assuming the 90 days trading horizon Sinosteel Luonai Materials is expected to generate 1.13 times more return on investment than China Galaxy. However, Sinosteel Luonai is 1.13 times more volatile than China Galaxy Securities. It trades about 0.09 of its potential returns per unit of risk. China Galaxy Securities is currently generating about 0.08 per unit of risk. If you would invest  342.00  in Sinosteel Luonai Materials on September 27, 2024 and sell it today you would earn a total of  56.00  from holding Sinosteel Luonai Materials or generate 16.37% return on investment over 90 days.

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

Sinosteel Luonai Materials  vs.  China Galaxy Securities

Sinosteel Luonai Mat

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Luonai Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Luonai sustained solid returns over the last few months and may actually be approaching a breakup point.

China Galaxy Securities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Galaxy Securities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Galaxy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinosteel Luonai and China Galaxy

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

The idea behind Sinosteel Luonai Materials and China Galaxy Securities 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.