Correlation Between Shandong and Dalian Zeus

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

Diversification Opportunities for Shandong and Dalian Zeus

0.08

Correlation Coefficient

Shandong  Dalian Zeus

Significant diversification

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

Pair Corralation between Shandong and Dalian Zeus

Assuming the 90 days trading horizon Shandong Hi Speed RoadBridge is expected to under-perform the Dalian Zeus. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Hi Speed RoadBridge is 5.47 times less risky than Dalian Zeus. The stock trades about -0.43 of its potential returns per unit of risk. The Dalian Zeus Entertainment is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  680.00  in Dalian Zeus Entertainment on October 10, 2024 and sell it today you would lose (108.00) from holding Dalian Zeus Entertainment or give up 15.88% of portfolio value over 90 days.

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

Shandong Hi Speed RoadBridge  vs.  Dalian Zeus Entertainment

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 somewhat strong basic indicators, Shandong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dalian Zeus Entertainment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Zeus Entertainment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Zeus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong and Dalian Zeus

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

The idea behind Shandong Hi Speed RoadBridge and Dalian Zeus Entertainment 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 Global Correlations module to find global opportunities by holding instruments from different markets.