Correlation Between Shan Dong and Huaxia Fund

Can any of the company-specific risk be diversified away by investing in both Shan Dong and Huaxia Fund 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 Huaxia Fund 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 Huaxia Fund Management, you can compare the effects of market volatilities on Shan Dong and Huaxia Fund 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 Huaxia Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Dong and Huaxia Fund.

Diversification Opportunities for Shan Dong and Huaxia Fund

0.37

Correlation Coefficient

Shan Dong  Huaxia Fund

Weak diversification

The 3 months correlation between Shan and Huaxia is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shan Dong Dong E and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Shan Dong i.e., Shan Dong and Huaxia Fund go up and down completely randomly.

Pair Corralation between Shan Dong and Huaxia Fund

Assuming the 90 days trading horizon Shan Dong Dong E is expected to generate 2.12 times more return on investment than Huaxia Fund. However, Shan Dong is 2.12 times more volatile than Huaxia Fund Management. It trades about 0.06 of its potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.04 per unit of risk. If you would invest  3,941  in Shan Dong Dong E on October 3, 2024 and sell it today you would earn a total of  2,331  from holding Shan Dong Dong E or generate 59.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Shan Dong Dong E  vs.  Huaxia Fund Management

Shan Dong Dong

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Huaxia Fund Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shan Dong and Huaxia Fund

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

The idea behind Shan Dong Dong E and Huaxia Fund Management 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.