Correlation Between Shan Dong and Jiangsu Phoenix

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

Diversification Opportunities for Shan Dong and Jiangsu Phoenix

-0.16

Correlation Coefficient

Shan Dong  Jiangsu Phoenix

Good diversification

The 3 months correlation between Shan and Jiangsu is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shan Dong Dong E and Jiangsu Phoenix Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Phoenix Publ 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 Jiangsu Phoenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Phoenix Publ has no effect on the direction of Shan Dong i.e., Shan Dong and Jiangsu Phoenix go up and down completely randomly.

Pair Corralation between Shan Dong and Jiangsu Phoenix

Assuming the 90 days trading horizon Shan Dong Dong E is expected to generate 0.95 times more return on investment than Jiangsu Phoenix. However, Shan Dong Dong E is 1.05 times less risky than Jiangsu Phoenix. It trades about 0.33 of its potential returns per unit of risk. Jiangsu Phoenix Publishing is currently generating about 0.18 per unit of risk. If you would invest  5,659  in Shan Dong Dong E on September 24, 2024 and sell it today you would earn a total of  661.00  from holding Shan Dong Dong E or generate 11.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Shan Dong Dong E  vs.  Jiangsu Phoenix Publishing

Shan Dong Dong

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shan Dong sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Phoenix Publ

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Phoenix Publishing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangsu Phoenix 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 Jiangsu Phoenix

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

The idea behind Shan Dong Dong E and Jiangsu Phoenix Publishing 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.