Correlation Between Baoshan Iron and Jiangxi Copper
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By analyzing existing cross correlation between Baoshan Iron Steel and Jiangxi Copper Co, you can compare the effects of market volatilities on Baoshan Iron and Jiangxi Copper 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 Baoshan Iron with a short position of Jiangxi Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baoshan Iron and Jiangxi Copper.
Diversification Opportunities for Baoshan Iron and Jiangxi Copper
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baoshan and Jiangxi is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Jiangxi Copper Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Copper and Baoshan Iron 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 Baoshan Iron Steel are associated (or correlated) with Jiangxi Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Copper has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Jiangxi Copper go up and down completely randomly.
Pair Corralation between Baoshan Iron and Jiangxi Copper
Assuming the 90 days trading horizon Baoshan Iron Steel is expected to generate 0.9 times more return on investment than Jiangxi Copper. However, Baoshan Iron Steel is 1.11 times less risky than Jiangxi Copper. It trades about 0.03 of its potential returns per unit of risk. Jiangxi Copper Co is currently generating about -0.13 per unit of risk. If you would invest 656.00 in Baoshan Iron Steel on August 31, 2024 and sell it today you would earn a total of 6.00 from holding Baoshan Iron Steel or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baoshan Iron Steel vs. Jiangxi Copper Co
Performance |
| Timeline |
| Baoshan Iron Steel |
| Jiangxi Copper |
Baoshan Iron and Jiangxi Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baoshan Iron and Jiangxi Copper
The main advantage of trading using opposite Baoshan Iron and Jiangxi Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baoshan Iron position performs unexpectedly, Jiangxi Copper 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 Jiangxi Copper will offset losses from the drop in Jiangxi Copper's long position.The idea behind Baoshan Iron Steel and Jiangxi Copper Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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