Correlation Between Shandong and CICC Fund

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

Diversification Opportunities for Shandong and CICC Fund

-0.03

Correlation Coefficient

Shandong  CICC Fund

Good diversification

The 3 months correlation between Shandong and CICC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hi Speed RoadBridge and CICC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICC Fund Management 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 CICC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICC Fund Management has no effect on the direction of Shandong i.e., Shandong and CICC Fund go up and down completely randomly.

Pair Corralation between Shandong and CICC Fund

Assuming the 90 days trading horizon Shandong Hi Speed RoadBridge is expected to under-perform the CICC Fund. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Hi Speed RoadBridge is 1.0 times less risky than CICC Fund. The stock trades about -0.03 of its potential returns per unit of risk. The CICC Fund Management is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  324.00  in CICC Fund Management on September 23, 2024 and sell it today you would earn a total of  44.00  from holding CICC Fund Management or generate 13.58% return on investment over 90 days.

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

Shandong Hi Speed RoadBridge  vs.  CICC Fund Management

Shandong Hi Speed

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hi Speed RoadBridge are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong sustained solid returns over the last few months and may actually be approaching a breakup point.

CICC Fund Management

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Shandong and CICC Fund

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

The idea behind Shandong Hi Speed RoadBridge and CICC 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.