Correlation Between Shan Dong and Shanghai V

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

Diversification Opportunities for Shan Dong and Shanghai V

-0.08

Correlation Coefficient

Shan Dong  Shanghai V

Good diversification

The 3 months correlation between Shan and Shanghai is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shan Dong Dong E and Shanghai V Test Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai V Test 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 Shanghai V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai V Test has no effect on the direction of Shan Dong i.e., Shan Dong and Shanghai V go up and down completely randomly.

Pair Corralation between Shan Dong and Shanghai V

Assuming the 90 days trading horizon Shan Dong Dong E is expected to generate 0.72 times more return on investment than Shanghai V. However, Shan Dong Dong E is 1.39 times less risky than Shanghai V. It trades about 0.17 of its potential returns per unit of risk. Shanghai V Test Semiconductor is currently generating about -0.17 per unit of risk. If you would invest  5,743  in Shan Dong Dong E on October 8, 2024 and sell it today you would earn a total of  334.00  from holding Shan Dong Dong E or generate 5.82% return on investment over 90 days.

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

Shan Dong Dong E  vs.  Shanghai V Test Semiconductor

Shan Dong Dong

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 2 (%) 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.

Shanghai V Test

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai V Test Semiconductor 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.

Pair Trading with Shan Dong and Shanghai V

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

The idea behind Shan Dong Dong E and Shanghai V Test Semiconductor 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.