Correlation Between Shandong and China Nonferrous

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

By analyzing existing cross correlation between Shandong Hi Speed RoadBridge and China Nonferrous Metal, you can compare the effects of market volatilities on Shandong and China Nonferrous 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 Shandong with a short position of China Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong and China Nonferrous.

Diversification Opportunities for Shandong and China Nonferrous

0.91

Correlation Coefficient

Shandong  China Nonferrous

Almost no diversification

The 3 months correlation between Shandong and China is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hi Speed RoadBridge and China Nonferrous Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Nonferrous Metal and Shandong 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 Shandong Hi Speed RoadBridge are associated (or correlated) with China Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Nonferrous Metal has no effect on the direction of Shandong i.e., Shandong and China Nonferrous go up and down completely randomly.

Pair Corralation between Shandong and China Nonferrous

Assuming the 90 days trading horizon Shandong Hi Speed RoadBridge is expected to under-perform the China Nonferrous. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Hi Speed RoadBridge is 1.16 times less risky than China Nonferrous. The stock trades about -0.07 of its potential returns per unit of risk. The China Nonferrous Metal is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  499.00  in China Nonferrous Metal on October 23, 2024 and sell it today you would lose (9.00) from holding China Nonferrous Metal or give up 1.8% of portfolio value over 90 days.

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

Shandong Hi Speed RoadBridge  vs.  China Nonferrous Metal

Shandong Hi Speed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Hi Speed RoadBridge 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.

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shandong and China Nonferrous

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

The idea behind Shandong Hi Speed RoadBridge and China Nonferrous Metal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.