Correlation Between China Vanke and Shanghai Lingyun

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

By analyzing existing cross correlation between China Vanke Co and Shanghai Lingyun Industries, you can compare the effects of market volatilities on China Vanke and Shanghai Lingyun 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 China Vanke with a short position of Shanghai Lingyun. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Vanke and Shanghai Lingyun.

Diversification Opportunities for China Vanke and Shanghai Lingyun

0.76

Correlation Coefficient

China Vanke  Shanghai Lingyun

Poor diversification

The 3 months correlation between China and Shanghai is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Vanke Co and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind and China Vanke 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 China Vanke Co are associated (or correlated) with Shanghai Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of China Vanke i.e., China Vanke and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between China Vanke and Shanghai Lingyun

Assuming the 90 days trading horizon China Vanke Co is expected to generate 0.83 times more return on investment than Shanghai Lingyun. However, China Vanke Co is 1.2 times less risky than Shanghai Lingyun. It trades about -0.06 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about -0.17 per unit of risk. If you would invest  868.00  in China Vanke Co on December 2, 2024 and sell it today you would lose (93.00) from holding China Vanke Co or give up 10.71% of portfolio value over 90 days.

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

China Vanke Co  vs.  Shanghai Lingyun Industries

China Vanke

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Vanke Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanghai Lingyun Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Lingyun Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Vanke and Shanghai Lingyun

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

The idea behind China Vanke Co and Shanghai Lingyun Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.