Correlation Between Sinosteel Engineering and Gansu Jiu

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Can any of the company-specific risk be diversified away by investing in both Sinosteel Engineering and Gansu Jiu 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 Engineering and Gansu Jiu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sinosteel Engineering and and Gansu Jiu Steel, you can compare the effects of market volatilities on Sinosteel Engineering and Gansu Jiu 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 Engineering with a short position of Gansu Jiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Engineering and Gansu Jiu.

Diversification Opportunities for Sinosteel Engineering and Gansu Jiu

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sinosteel and Gansu is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Engineering and and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel and Sinosteel Engineering 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 Engineering and are associated (or correlated) with Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Sinosteel Engineering i.e., Sinosteel Engineering and Gansu Jiu go up and down completely randomly.

Pair Corralation between Sinosteel Engineering and Gansu Jiu

Assuming the 90 days trading horizon Sinosteel Engineering and is expected to generate 0.64 times more return on investment than Gansu Jiu. However, Sinosteel Engineering and is 1.56 times less risky than Gansu Jiu. It trades about 0.2 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.24 per unit of risk. If you would invest  649.00  in Sinosteel Engineering and on September 1, 2024 and sell it today you would earn a total of  61.00  from holding Sinosteel Engineering and or generate 9.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sinosteel Engineering and  vs.  Gansu Jiu Steel

 Performance 
       Timeline  
Sinosteel Engineering and 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Engineering and are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.
Gansu Jiu Steel 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu sustained solid returns over the last few months and may actually be approaching a breakup point.

Sinosteel Engineering and Gansu Jiu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sinosteel Engineering and Gansu Jiu

The main advantage of trading using opposite Sinosteel Engineering and Gansu Jiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinosteel Engineering position performs unexpectedly, Gansu Jiu 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 Gansu Jiu will offset losses from the drop in Gansu Jiu's long position.
The idea behind Sinosteel Engineering and and Gansu Jiu Steel 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.
Check out your portfolio center.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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