Correlation Between Sinosteel Luonai and GalaxyCore

Can any of the company-specific risk be diversified away by investing in both Sinosteel Luonai and GalaxyCore 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 GalaxyCore 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 GalaxyCore, you can compare the effects of market volatilities on Sinosteel Luonai and GalaxyCore 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 GalaxyCore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Luonai and GalaxyCore.

Diversification Opportunities for Sinosteel Luonai and GalaxyCore

0.82

Correlation Coefficient

Sinosteel Luonai  GalaxyCore

Very poor diversification

The 3 months correlation between Sinosteel and GalaxyCore is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Luonai Materials and GalaxyCore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GalaxyCore 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 GalaxyCore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GalaxyCore has no effect on the direction of Sinosteel Luonai i.e., Sinosteel Luonai and GalaxyCore go up and down completely randomly.

Pair Corralation between Sinosteel Luonai and GalaxyCore

Assuming the 90 days trading horizon Sinosteel Luonai Materials is expected to generate 0.66 times more return on investment than GalaxyCore. However, Sinosteel Luonai Materials is 1.52 times less risky than GalaxyCore. It trades about -0.04 of its potential returns per unit of risk. GalaxyCore is currently generating about -0.03 per unit of risk. If you would invest  424.00  in Sinosteel Luonai Materials on October 1, 2024 and sell it today you would lose (19.00) from holding Sinosteel Luonai Materials or give up 4.48% of portfolio value over 90 days.

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

Sinosteel Luonai Materials  vs.  GalaxyCore

Sinosteel Luonai Mat

Risk-Adjusted Performance

0 of 100

Weak

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

GalaxyCore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GalaxyCore 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sinosteel Luonai and GalaxyCore

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

The idea behind Sinosteel Luonai Materials and GalaxyCore 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.