Correlation Between MOUNT GIBSON and China Railway

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

By analyzing existing cross correlation between MOUNT GIBSON IRON and China Railway Signal, you can compare the effects of market volatilities on MOUNT GIBSON and China Railway 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 MOUNT GIBSON with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOUNT GIBSON and China Railway.

Diversification Opportunities for MOUNT GIBSON and China Railway

-0.01

Correlation Coefficient

MOUNT GIBSON  China Railway

Good diversification

The 3 months correlation between MOUNT and China is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MOUNT GIBSON IRON and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal and MOUNT GIBSON 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 MOUNT GIBSON IRON are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Signal has no effect on the direction of MOUNT GIBSON i.e., MOUNT GIBSON and China Railway go up and down completely randomly.

Pair Corralation between MOUNT GIBSON and China Railway

Assuming the 90 days trading horizon MOUNT GIBSON IRON is expected to under-perform the China Railway. In addition to that, MOUNT GIBSON is 1.97 times more volatile than China Railway Signal. It trades about -0.1 of its total potential returns per unit of risk. China Railway Signal is currently generating about 0.21 per unit of volatility. If you would invest  38.00  in China Railway Signal on October 8, 2024 and sell it today you would earn a total of  2.00  from holding China Railway Signal or generate 5.26% return on investment over 90 days.

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

MOUNT GIBSON IRON  vs.  China Railway Signal

MOUNT GIBSON IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MOUNT GIBSON IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Railway Signal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Signal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MOUNT GIBSON and China Railway

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

The idea behind MOUNT GIBSON IRON and China Railway Signal 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.