Correlation Between ANGANG STEEL and Pearson Plc

Can any of the company-specific risk be diversified away by investing in both ANGANG STEEL and Pearson Plc 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 ANGANG STEEL and Pearson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ANGANG STEEL H and Pearson plc, you can compare the effects of market volatilities on ANGANG STEEL and Pearson Plc 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 ANGANG STEEL with a short position of Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANGANG STEEL and Pearson Plc.

Diversification Opportunities for ANGANG STEEL and Pearson Plc

0.17

Correlation Coefficient

ANGANG STEEL  Pearson Plc

Average diversification

The 3 months correlation between ANGANG and Pearson is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ANGANG STEEL H and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and ANGANG STEEL 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 ANGANG STEEL H are associated (or correlated) with Pearson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson plc has no effect on the direction of ANGANG STEEL i.e., ANGANG STEEL and Pearson Plc go up and down completely randomly.

Pair Corralation between ANGANG STEEL and Pearson Plc

Assuming the 90 days trading horizon ANGANG STEEL H is expected to under-perform the Pearson Plc. In addition to that, ANGANG STEEL is 2.78 times more volatile than Pearson plc. It trades about -0.01 of its total potential returns per unit of risk. Pearson plc is currently generating about 0.07 per unit of volatility. If you would invest  993.00  in Pearson plc on October 11, 2024 and sell it today you would earn a total of  567.00  from holding Pearson plc or generate 57.1% return on investment over 90 days.

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

ANGANG STEEL H   vs.  Pearson plc

ANGANG STEEL H

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ANGANG STEEL H are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ANGANG STEEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pearson plc

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson plc are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pearson Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANGANG STEEL and Pearson Plc

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

The idea behind ANGANG STEEL H and Pearson plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.