Correlation Between Baoshan Iron and Tibet Huayu
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By analyzing existing cross correlation between Baoshan Iron Steel and Tibet Huayu Mining, you can compare the effects of market volatilities on Baoshan Iron and Tibet Huayu 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 Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baoshan Iron and Tibet Huayu.
Diversification Opportunities for Baoshan Iron and Tibet Huayu
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baoshan and Tibet is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Baoshan Iron Steel and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining 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 Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Baoshan Iron i.e., Baoshan Iron and Tibet Huayu go up and down completely randomly.
Pair Corralation between Baoshan Iron and Tibet Huayu
Assuming the 90 days trading horizon Baoshan Iron is expected to generate 11.05 times less return on investment than Tibet Huayu. But when comparing it to its historical volatility, Baoshan Iron Steel is 3.07 times less risky than Tibet Huayu. It trades about 0.03 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,278 in Tibet Huayu Mining on August 31, 2024 and sell it today you would earn a total of 141.00 from holding Tibet Huayu Mining or generate 11.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baoshan Iron Steel vs. Tibet Huayu Mining
Performance |
| Timeline |
| Baoshan Iron Steel |
| Tibet Huayu Mining |
Baoshan Iron and Tibet Huayu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baoshan Iron and Tibet Huayu
The main advantage of trading using opposite Baoshan Iron and Tibet Huayu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baoshan Iron position performs unexpectedly, Tibet Huayu 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 Tibet Huayu will offset losses from the drop in Tibet Huayu's long position.The idea behind Baoshan Iron Steel and Tibet Huayu Mining 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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