Correlation Between CosmoSteel Holdings and Jiangsu Expressway

Can any of the company-specific risk be diversified away by investing in both CosmoSteel Holdings and Jiangsu Expressway 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 CosmoSteel Holdings and Jiangsu Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CosmoSteel Holdings Limited and Jiangsu Expressway, you can compare the effects of market volatilities on CosmoSteel Holdings and Jiangsu Expressway 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 CosmoSteel Holdings with a short position of Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of CosmoSteel Holdings and Jiangsu Expressway.

Diversification Opportunities for CosmoSteel Holdings and Jiangsu Expressway

0.45

Correlation Coefficient

CosmoSteel Holdings  Jiangsu Expressway

Very weak diversification

The 3 months correlation between CosmoSteel and Jiangsu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and Jiangsu Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway and CosmoSteel Holdings 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 CosmoSteel Holdings Limited are associated (or correlated) with Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and Jiangsu Expressway

Assuming the 90 days horizon CosmoSteel Holdings is expected to generate 3.73 times less return on investment than Jiangsu Expressway. In addition to that, CosmoSteel Holdings is 1.36 times more volatile than Jiangsu Expressway. It trades about 0.02 of its total potential returns per unit of risk. Jiangsu Expressway is currently generating about 0.12 per unit of volatility. If you would invest  87.00  in Jiangsu Expressway on October 3, 2024 and sell it today you would earn a total of  15.00  from holding Jiangsu Expressway or generate 17.24% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  Jiangsu Expressway

CosmoSteel Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CosmoSteel Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Jiangsu Expressway

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Jiangsu Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CosmoSteel Holdings and Jiangsu Expressway

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

The idea behind CosmoSteel Holdings Limited and Jiangsu Expressway 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.