Correlation Between Shan Dong and Chengdu Spaceon

Can any of the company-specific risk be diversified away by investing in both Shan Dong and Chengdu Spaceon 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 Shan Dong and Chengdu Spaceon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shan Dong Dong E and Chengdu Spaceon Electronics, you can compare the effects of market volatilities on Shan Dong and Chengdu Spaceon 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 Shan Dong with a short position of Chengdu Spaceon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Dong and Chengdu Spaceon.

Diversification Opportunities for Shan Dong and Chengdu Spaceon

-0.02

Correlation Coefficient

Shan Dong  Chengdu Spaceon

Good diversification

The 3 months correlation between Shan and Chengdu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shan Dong Dong E and Chengdu Spaceon Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Spaceon Elec and Shan Dong 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 Shan Dong Dong E are associated (or correlated) with Chengdu Spaceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Spaceon Elec has no effect on the direction of Shan Dong i.e., Shan Dong and Chengdu Spaceon go up and down completely randomly.

Pair Corralation between Shan Dong and Chengdu Spaceon

Assuming the 90 days trading horizon Shan Dong Dong E is expected to generate 0.71 times more return on investment than Chengdu Spaceon. However, Shan Dong Dong E is 1.4 times less risky than Chengdu Spaceon. It trades about -0.04 of its potential returns per unit of risk. Chengdu Spaceon Electronics is currently generating about -0.05 per unit of risk. If you would invest  6,322  in Shan Dong Dong E on December 25, 2024 and sell it today you would lose (250.00) from holding Shan Dong Dong E or give up 3.95% of portfolio value over 90 days.

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

Shan Dong Dong E  vs.  Chengdu Spaceon Electronics

Shan Dong Dong

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shan Dong Dong E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shan Dong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chengdu Spaceon Elec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chengdu Spaceon Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chengdu Spaceon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shan Dong and Chengdu Spaceon

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

The idea behind Shan Dong Dong E and Chengdu Spaceon Electronics 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.